Trump’s Greenland Ambitions and Venezuela Tensions Send European Defense Stocks Soaring

European defense stocks are off to a blistering start in 2026, as U.S. threats over Greenland and escalating tensions with Venezuela reignite a rally in one of last year’s hottest market sectors.

The Stoxx Europe Aerospace and Defence index has climbed nearly 15% this month alone, accounting for more than a quarter of its record-breaking gains from the previous year. Among the top performers are Sweden’s Saab, up 32%, German contractor Rheinmetall with a 22% gain, and the UK’s BAE Systems, also up 22%.

The rally follows the surprise U.S. capture of Venezuelan leader Nicolás Maduro and President Donald Trump’s repeated insistence that the U.S. must “acquire” Greenland—refusing to rule out military force to do so. These moves have investors betting that European governments will be forced to keep raising defense spending, directly benefiting domestic suppliers.

Higher defense spending “led to a huge run-up in the share prices over the past two years… [and] now we’ve got this massive surge again,” said Nick Cunningham, an analyst at Agency Partners.

The past two weeks have offered “plenty of evidence that the U.S. is no longer a reliable ally for Europe, so Europe will have to build its own capabilities,” he added, explaining the boost to the region’s defense stocks.

The sector’s benchmark index has more than tripled since Russia’s full-scale invasion of Ukraine in early 2022, as investors flocked to undervalued companies that had long lagged their U.S. peers. The gains accelerated after Trump’s return to power a year ago, when Washington began demanding that Europe take on greater responsibility for its own security.

European leaders and other NATO members pledged in June to increase defense spending to 5% of GDP. The rally cooled late last year as investors weighed the possibility of a peace deal in Ukraine, but it has roared back this month.

The ouster of Maduro was followed by U.S. threats of military action against Iran in response to its violent crackdown on protestors, further stoking market sentiment.

In Greenland, NATO troops are expected to establish a “more permanent” presence, according to Denmark’s defense minister. Germany, the UK, France, Finland, and the Netherlands have also said they will conduct limited troop deployments to the island.

Evelyn Chow, a portfolio manager at Neuberger Berman, said Washington’s actions in Venezuela and Greenland “underscore the inherent tension between EU national sovereignty [and] the historical relationship with the U.S. as an ally.” She added that it “catalyzes even greater urgency on the part of EU countries to bolster their domestic defense industrial base.”

Saab, Rheinmetall, and BAE have been primary beneficiaries of Europe’s military spending surge and have reported record order backlogs. Saab, maker of the Gripen fighter jet and various weapons systems, is seen as a key winner from Sweden’s rearmament drive. The Nordic country announced this week it would spend $440 million on unmanned military drone systems.

BAE, which builds all nuclear submarines for the UK’s Royal Navy, is benefiting from increased domestic nuclear spending, while its U.S. business is poised to gain from higher budgets under the Trump administration. Rheinmetall has set ambitious financial targets, including a pledge to hit €50 billion in annual sales by 2030, a fivefold increase from 2024. The company has also expanded into new areas like warship and satellite manufacturing.

Adding to the sector’s activity, ammunition maker Czechoslovak Group on Wednesday confirmed plans for an initial public offering in Amsterdam in the coming weeks, confirming an earlier FT report.

While defense stocks are rising globally, Europe’s rally is once again outpacing that of the U.S., where the S&P 500 Aerospace & Defense sub-index is up 11% this month after a 40% climb in 2025.

Lockheed Martin has gained 20%, with Boeing up 14% and Northrop Grumman rising 17%. Among smaller firms, submarine maker Huntington Ingalls has jumped 25%, while drone manufacturer AeroVironment has surged 62%.

The U.S. sector initially rallied after the intervention in Venezuela but dipped on Trump’s threats to curb dividends and buybacks. Those losses were quickly recovered after the president called on Congress to raise the U.S. defense budget by 50% to $1.5 trillion.

However, Rob Stallard, an analyst at Vertical Research, called Trump’s proposed spending increase “aspiration rather than actual policy,” adding that investors questioned the feasibility of a 50% hike given its impact on the public deficit. “People are not modeling 50 percent, let’s put it that way,” he said.

The sharp run-up in Europe is also drawing caution from some analysts. On Tuesday, Deutsche Bank downgraded shares of BAE, Leonardo, and France’s Thales from “buy” to “hold,” citing high valuations that could limit further gains.

“Despite our confidence in the industry upcycle, we are getting to a point where [prices] are fully discounting the upside and therefore become vulnerable again to any suggestion that it might not happen according to plan,” said Cunningham of Agency Partners. “We end up in a state of vulnerability.”

Ακολουθήστε το στο Google News και μάθετε πρώτοι όλες τις ειδήσειςΔείτε όλες τις τελευταίες Ειδήσεις από την Ελλάδα και τον Κόσμο, στο