As we know, EUAD and RHM have been strengthened by the Ukraine War, though they seem to have stagnated since mid-2025 due to the perception of a stalemate in the war.
However, with the current trajectory of the Iran War it’s looking increasingly likely to me that the US will be fully occupied in the Middle East and provide even less support to Europe and Ukraine. Plus the oil surge is significantly helping Russia’s war effort. I think it’s not incorrect to say that the US’s start of the Iran War has significantly decreased the chance of a favorable outcome in Ukraine and may lead to escalation losses there as well, as much as I want Ukraine to win.
This is why I bring up the European defense sector. If Ukraine starts losing ground I believe we will see massive investment in European defense, perhaps even stronger than in 2022 due to the potential lack of US support this time.
Currently however the markets are focused on oil vs equities, which has also seen the defense sector take losses across the board. Plus supply chain disruptions for critical military materials like Helium. So I don’t think we’ve hit the bottom for defense yet, but I am keeping an eye on it, especially in Europe.
How is this analysis?
Posted by xynith116
1 Comment
It’s hard to say. On the one hand, the conflict with Iran and ongoing war with Russia makes it more likely for European arms manufacturers to get big new orders.
But on the other hand, Europe is going to get pummeled by this energy crisis worse than the US or China, which raises questions about how much the EU will invest in defense spending.
I’m currently holding some WDEF but it’s down almost 10% already from when I bought it earlier this year