European defence stocks at two-month high after US move on Venezuela

• Germany's Hensoldt, Rheinmetall, and Renk led gains with 6-7% increases, while Italy's Leonardo, Sweden's SAAB, and Spain's Indra also rose around 6%
• Analysts at Jefferies noted the Venezuela strike may redirect Washington's focus toward Greenland and Ukraine ceasefire negotiations, removing a key policy overhang on the defence sector
• France expressed support for Denmark and Greenland's sovereignty amid renewed U.S. threats, with potential European troop deployments reinforcing the need to raise defence budgets quickly

European Defence Stocks Surge on Venezuela Military Action

European defence stocks reached a two-month high on January 5, 2026, following U.S. military action in Venezuela over the weekend. The aerospace and defence index rose 3.2% by 0902 GMT—its highest level since late October—significantly outperforming the pan-European STOXX 600's 0.4% gain.

Top Performers

German defence companies led the rally, with Hensoldt, Rheinmetall, and Renk each climbing 6-7%, ranking among STOXX's top gainers. Italy's Leonardo rose 6%, Sweden's SAAB gained 6.7%, and Spain's Indra added 6%. BAE Systems, Thales, and Dassault Aviation each increased approximately 4%.

Market Implications

Jefferies analysts noted that the Venezuela strike removes a key U.S. foreign policy concern, potentially shifting Washington's focus toward Greenland and achieving a Ukraine ceasefire—both developments that could benefit European defence stocks. The analysts suggested that European troop deployment to Greenland may return to the agenda, particularly after France pledged support for Denmark and Greenland's sovereignty following President Trump's renewed threats to acquire the territory.

Strategic Outlook

Analysts emphasized these geopolitical developments "would support European defence names today, further reinforcing the need to raise defence budgets quickly." The Ukraine conflict has been a major overhang on the sector, and progress toward resolution could provide additional momentum.

The rally reflects investor confidence in increased European defence spending amid heightened geopolitical tensions and shifting U.S. strategic priorities, with the sector poised to benefit from accelerated military modernization programs across the continent.