Germany’s €2.5 Billion Arms Deal Ignites Defense Market Boom

Germany’s €2.5 Billion Weapons Order Sparks Record Highs in Defense Stocks

Editorial Team (ET)May 7, 2025

Shares of European defense companies are hitting record highs after Germany’s parliament approved a massive €2.5 billion ($2.6 billion) weapons and equipment order. The decision, made in the final budget committee session before Germany’s snap election, is the latest sign of Europe’s accelerating military buildup.

European Defense Giants Reap the Benefits

The move sent defense stocks soaring, with UBS AG’s basket of European defense stocks climbing 1.7% to an all-time high on Thursday. The sector has already surged nearly 9% this year, building on last year’s staggering 53% gain.

Germany’s defense push is part of a broader trend within NATO, triggered by Russia’s invasion of Ukraine. This rapid increase in military spending has fueled investor confidence in defense contractors, with shares of Germany’s Rheinmetall AG rising 2.2% to a record high, while Hensoldt AG gained 2.5% and Renk Group AG jumped more than 4%. France’s Dassault Aviation SA also saw a 2.3% boost.

Billions Poured Into Military Upgrades

The newly approved funds will finance a €1.8 billion communication system for the Bundeswehr, €417 million in infantry supplies, and €100 million for anti-tank weaponry and a weapons station. These investments are just a fraction of the €100 billion special off-budget fund Germany has allocated for defense modernization.

Thyssenkrupp Marine Systems Lands a €4.1 Billion Deal

Beyond the immediate purchases, Germany’s Budget Committee also approved state guarantees for Thyssenkrupp Marine Systems, allowing it to secure a €4.1 billion contract to build three Type 209 submarines for Argentina. The deal includes replacement parts and training, further bolstering Germany’s defense industry.

A Global Trend in Military Spending

“This bodes well for defense contractors, as governments prioritize military readiness and self-sufficiency over budget constraints,” said Patrick Armstrong, CIO at Plurimi Wealth, which holds shares in Dassault Aviation. As geopolitical tensions escalate, investors are increasingly viewing defense stocks as long-term growth opportunities.

Conclusion

Germany’s latest defense spending spree underscores a seismic shift in European military policy. As NATO members ramp up their defense budgets, investors are piling into defense stocks, pushing valuations to record levels. With billions more in contracts expected, this rally may be just the beginning.

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