European defence extends recovery after renewed U.S.-Iran attacks

Leonardo SpA

28/05/2026 12:05

Adds analyst comments, updates share moves
** European defence stocks extend their recent recovery, sharply outperforming a weak market as renewed U.S.-Iran attacks dampen hopes for a peace deal in the three-month-old conflict
** The STOXX Aerospace & Defence .SXPARO is up 1.7%, turning positive for the year after hitting a one-year low this month on concerns about Europe's ability to ramp up defence spending; the index is now up over 12% from that trough
** Mediobanca Research sees persistent escalation risk, with U.S.-Iran positions still far apart, limiting prospects for a near-term deal    
** "The conflict exposed major deficiencies in air defence across both the Middle East and Europe, potentially triggering a new wave of orders regardless of the outcome of negotiations"
** The broker affirms its overweight on defence and upgrades BAE Systems BAES.L to "outperform", saying the UK group should disproportionately benefit from higher U.S. spending
** Germany's Hensoldt HAGG.DE, Rheinmetall RHMG.DE and Renk R3NK.DE rise 5-6%. France's Thales TCFP.PA and Italy's Leonardo LDOF.MI Sweden's Saab SAABb.ST are up 2-5%
** Spanish defence firm Indra IDR.MC and Norwegian defence technology maker Kongsberg KOG.OL gain around 5%. BAE rises 2%
** Warship builder TKMS TKMS.DE leads gainers, up 8.1%
** A trader says recent weakness is seen by some investors as a buying opportunity given strong sector fundamentals: "Think the sector has fallen enough"

 (Reporting by Ozan Ergenay, Danilo Masoni)
 ((ozan.ergenay@thomsonreuters.com))