Fear of crisis: Shares of Rheinmetall, RENK, HENSOLDT, TKMS and MTU at odds

• Defense stocks react surprisingly cautiously
• Taking profits after a sharp rise in price
• Production bottlenecks and the market environment are slowing prices

The defense stocks Rheinmetall, HENSOLDT, RENK, TKMS and MTU were divided at the start of the week. Rheinmetall stocks ultimately gained 2.04 percent to 1,625.00 euros on RENK shares were down 0.47 percent at 55.45 euros, while TKMS were 0.05 percent lower at 93.05 euros and MTU Aero Engines shares fell 2.88 percent to 340.90 euros.

Thales increased in Paris and BAE Systems in London. Among other things, Thales develops radar systems and supports armed forces in securing critical infrastructure. BAE has recently been in focus as a supplier for the US Army’s THAAD missile defense system. Leonardo shares are strong in Milan. The technology group produces helicopters and military aircraft as well as electronic surveillance systems.

There is also movement in arms levels in the USA. Lockheed Martin shares on the NYSE temporarily rose by 0.3 percent to $673.81 and Northrop Grumman shares fell by 0.02 percent to $755.99. The appointment of Mojtaba Khamenei as Iran’s new supreme leader suggests that there will be no quick peace in the Middle East and therefore demand for equipment such as drones, missiles, interceptors, manned fighters and tankers will continue to boom, they say.

Paradox on the stock market: Why German defense stocks are not bullish

The geopolitical situation is currently more tense than it has been for a long time. After the military conflicts in the Middle East and the blockade of the Strait of Hormuz by Iran, one could have expected an unbridled rally in defense stocks on the stock exchanges, but the past trading days have only shown manageable gains for some stocks, and many industry representatives have even caused losses in investors’ portfolios.

However, this phenomenon is less a sign of waning confidence in the industry and more the result of technical market factors and operational realities.

Investors take profits

A key reason for the current weakness is market psychology. Professional investors are likely to have priced in the escalation in Iran since the turn of 2025/26, which resulted in strong price gains for many defense stocks as the markets anticipated an increase in tensions. With the actual outbreak of hostilities, the classic stock market saying “Buy the rumor, sell the fact” came into force. Investors took advantage of the extremely high prices to realize profits and secure liquidity, which increased the selling pressure on the securities that were actually in demand.

Operational hurdles at HENSOLDT and RENK

While the demand for defense electronics and drive technology is higher than ever before, companies like HENSOLDT and the RENK Group are struggling with the downside of the boom. The bulging order books lead to massive capacity bottlenecks. Investors are increasingly skeptical about companies’ ability to convert these orders into sales and profits in a timely manner. In addition, supply chains disrupted by the conflict and rising energy prices are putting a strain on margins. At RENK, for example, a cautious outlook weighed on profitability – and, despite record demand, also on the mood of shareholders.

The special role of TKMS and MTU Aero Engines

Another factor plays a role at thyssenkrupp Marine Systems (TKMS): Although the importance of submarines and corvettes is underlined by the instability in the Persian Gulf, integration into the MDAX also brings with it short-term burdens, as investors reduce risks in the wake of falling indices and act increasingly selectively even with stocks that are perceived as structural winners.

MTU Aero Engines, on the other hand, is affected in two ways: on the one hand, the company benefits from the military engine business, but on the other hand, the civil aviation division is suffering massively from the skyrocketing kerosene prices and closed airspace as a result of the Iran conflict, which is putting a strain on the overall result. The fact that the company expects falling margins is also not well received by investors.

Market environment burdened

Last but not least, the general market environment is putting pressure on valuations. Inflation fueled by the war in the Middle East is dwindling hopes that interest rates will be cut soon. Higher interest rates not only make financing more expensive for the defense companies themselves, but also make government bonds more attractive than dividend stocks.

Editorial staff at finanzen.net with material from Dow Jones Newswires

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