By Caitlin McCabe

This year's fierce rally in European defense stocks found new legs Monday after leaders on the continent met over the weekend to forge a peace plan for Ukraine, during which they pledged to ramp up defense spending.

Shares in companies including Germany's Rheinmetall, Italy's Leonardo and Sweden's Saab each surged 10% or more. London-based BAE Systems was among the top gainers, rising more than 12%.

These stocks have been among the best-performing trades in global markets this year. They have been bolstered by expectations that European nations will need to boost defense spending to help deter further Russian aggression in Ukraine, and by broader concern that the U.S. may no longer be willing to come to the continent's defense.

The German arms maker Rheinmetall has climbed more than 80% in 2025, making it the best performer in the Stoxx Europe 600. That's nearly double the returns of the best-performing stock in the S&P 500-CVS Health, which is up 46%.

British Prime Minister Keir Starmer hosted nearly 20 allies in London Sunday to discuss building a "coalition of the willing" that would commit military assets, including troops on the ground, to secure peace for war-afflicted Ukraine. NATO chief Mark Rutte said that several nations at the meeting had pledged to spend more on defense, without providing details.

European defense companies have been strong performers since Russia invaded Ukraine in 2022, but the trade has accelerated this year as President Trump's view on American support for Ukraine has soured. Those tensions exploded into the open Friday, during a fiery clash with Ukrainian President Volodymyr Zelensky at the White House, which kicked off frantic diplomacy among European allies over the weekend.

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(END) Dow Jones Newswires

March 03, 2025 06:41 ET (11:41 GMT)

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