The era of "hard power": defense stocks in Europe and Asia rise amid US takeover of Maduro

Shares in defense companies in Europe and Asia have risen sharply. Following the capture of Venezuelan President Nicolás Maduro by the US military, investors are betting on a strengthening trend toward global rearmament, which, according to analysts, will receive additional momentum due to a tougher US foreign policy, writes CNBC.

Shares in defense companies in Europe and Asia rose on Monday, January 5: Rheinmetall, Germany's largest arms manufacturer, saw its shares rise by 7.7%. Shares in military technology and surveillance systems developer Hensoldt rose 8.9%. Italy's Leonardo gained 6.3%, while its German competitor Renk rose 7.4%. Shares in Swedish fighter jet manufacturer Saab rose 6.6%.

In Asia, growth in the defense sector was led by Japan's IHI, one of the key suppliers of aircraft engines, missile components, and systems for the Japanese Navy: its shares jumped by almost 9%. It was followed by Japan's Mitsubishi Heavy Industries, the country's largest defense contractor, which manufactures combat aircraft, submarines, missile systems, and military electronics—its shares rose 8.4%. Shares in Kawasaki Heavy Industries, which supplies helicopters, transport aircraft, and equipment to the Japan Self-Defense Forces, gained 7.9%.

In South Korea, shares in Hanwha Aerospace, a leading manufacturer of aircraft engines, artillery systems, and missile weapons, closed up 7%. Shares in Poongsan, which specializes in the production of ammunition and components for the defense industry, rose 2.2%.

In the US, shares of Lockheed Martin, the largest fighter jet manufacturer, rose 1.2% in premarket trading, while shares of missile manufacturer RTX rose 0.1%.

Investors believe that the US capture of Venezuelan leader Nicolas Maduro could signal a major geopolitical shift and, in the long term, support the global trend toward rearmament in Europe and Asia, CNBC reports.

The growth of European defense companies has been a sharp turnaround for the sector, which has been fluctuating in recent weeks amid expectations of a possible peace agreement between Russia and Ukraine, the TV channel notes.

Moneta's senior investment advisor, Aoyfin Devitt, expects a surge in defense spending amid the US's exceptionalist approach and the recent emergence of "gunboat diplomacy" — an approach to foreign policy in which pressure is exerted on other countries through the demonstration or use of military force, rather than through negotiations and international institutions. "A new year, a new world order — I think we all need to accept that," the expert noted, adding that the emerging situation "will lead to increased defense spending as a precaution." "Do we think this is a productive use of funds, where we will actually create jobs and ensure long-term economic growth? Probably not. But that's where we need to go," DeVitt added.

Fulcrum Asset Management Chief Investment Officer Fawaz Chaudhry also called the US military's capture of Maduro a "signal act" that could change the geopolitical situation. When President Trump refers to the Monroe Doctrine (a principle of US foreign policy according to which the Western Hemisphere is considered Washington's priority interest zone and external interference in the region is unacceptable. — Oninvest), he is saying that America's immediate sphere of influence will be controlled through the use of hard power," Chaudhry said on CNBC. In his opinion, a more aggressive US foreign policy will lead to "greater rearmament in Europe and Asia" in the long term. What President Trump and the US have done in Venezuela will only reinforce this trend [of increased defense spending around the world]. More military spending, more rearmament in Europe and Asia — and this trend will continue," he said.

This article was AI-translated and verified by a human editor