By Ben Lucas
The share prices of major British and European defence companies nudged higher today as the conflict between Israel and Hamas continued.
BAE Systems share price closed up 1.27 per cent, while Babcock shares rose 1.4 per cent.
In Europe, shares in both French defence electronics firm Thales and Italian defence giant Leonardo both moved up over one per cent.
“Periods of tension and conflict usually give a lift to defence stocks, and the current crisis in the Middle East is no exception,” Danni Hewson, head of financial analysis at AJ Bell, said.
“In a time of heightened tension, governments are more likely to bolster military capabilities and that expectation is feeding through to investor sentiment,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
Defence companies have already seen their share prices surge over the last eighteen months following Russia’s invasion of Ukraine, with BAE shares up 20 per cent since the start of the year.
“Expect that to continue,” Michael Hewson, chief market analyst at CMC Markets UK, said.
Streeter said that a drop in government bond yields will also make borrowing for governments a little cheaper, and may provide more room for manoeuvre in budgets for extra defence spending if required.
Streeter noted, however, that defence firms have also been riding on increasing market optimism regarding the future path of monetary policy, with expectations settling in that the US will hold interest rates where they are at its next meeting in November.
