Defense stocks surge worldwide amid Trump's military policies

Monday 12 January 2026 - 10:50

By: Dakir Madiha

Defense stocks surge worldwide amid Trump's military policies

Defense stocks on both sides of the Atlantic have surged during the second week of January 2026, driven by President Donald Trump's aggressive foreign policy and expectations of sharply increased global military spending. This rally follows the Trump administration's military operation in Venezuela earlier this month, ongoing threats regarding Greenland, and signals from the White House hinting at potential intervention in Iran.

In Seoul, the KOSPI index extended its record-breaking streak to seven consecutive sessions on January 12, closing at 4,624.79 points, up 0.84%. The benchmark has climbed nearly 10% since the start of the year, led by gains in defense and shipbuilding shares. Hanwha Ocean jumped 9.2% to 146,800 won, while Doosan Enerbility rose 5.1%. LIG Nex1 advanced 3.32%, and Korea Aerospace Industries gained 2.74%.

Analysts point to reports of Trump considering military options in Iran as a key trigger for South Korean defense stocks. "As geopolitical tensions escalate worldwide, every nation must boost its defense spending," said Lee Jae-won, an analyst at Shinhan Securities.

European arms makers are outperforming global markets in 2026. BAE Systems has risen 20% year-to-date, Rheinmetall 15%, while French firm Thales and Italy's Leonardo each gained over 10% this week alone. A Goldman Sachs-tracked basket of European defense stocks climbed as much as 3.8% on January 8, marking a weekly advance of about 13%.

The upswing stems from two main drivers: Trump's call for a U.S. defense budget of $1.5 trillion by 2027, a 50% increase and growing anticipation that European nations will ramp up military outlays amid unpredictable U.S. foreign policy.

At the NATO summit in The Hague last June, member states pledged to raise defense and security spending to 5% of GDP by 2035, up from the prior 2% target. This includes at least 3.5% for core military needs and up to 1.5% for cybersecurity, infrastructure, and resilience.

Trump's foreign policy approach, dubbed the "Donroe Doctrine," blends 19th-century Monroe Doctrine elements with bold assertions of U.S. dominance in the Western Hemisphere. After capturing Venezuelan President Nicolás Maduro in early January, Trump declared that "U.S. dominance in the Western Hemisphere will never again be in question."

The doctrine has rattled traditional allies, especially Denmark. Prime Minister Mette Frederiksen warned that U.S. military action against Greenland would "put everything on hold, including NATO." Trump has persisted in claiming Greenland is vital for U.S. national security and refused to rule out military options.

With Trump now eyeing strikes on Iran amid ongoing protests there, analysts foresee heightened pressure on defense budgets. "European investment in self-defense will likely intensify further, anticipating reduced U.S. security support," said Kim Seungcheol, head of ETF investments at NH-Amundi Asset Management.