LONDON, March 11, 2026, 15:14 GMT
Shares of BAE Systems slipped 1.3% to 2,219 pence in London by 1105 GMT, following Tuesday’s close at 2,249 pence. The move echoed a broader retreat in European defence names as Germany’s Rheinmetall underwhelmed sections of the market with its sales guidance, prompting fresh caution among investors over Middle East war risks.
The decline stands out—BAE has been among the FTSE 100’s top defence performers this year, driven by hopes for bigger Western military budgets and expectations that Washington will need to refill inventories after recent operations. But as oil prices, rates, and risk appetite move in tandem, even the sector’s favourites like BAE are showing how quickly momentum can crack.
Last month, BAE projected a 7% to 9% bump in 2026 sales, with operating profit set to grow between 9% and 11%. For 2025, operating profit was up 12%. The company’s order backlog hit a fresh high at 83.6 billion pounds. Chief Executive Charles Woodburn described it as a “new era of defence spending.” Reuters
Selling hit the whole sector on Wednesday. Shares in Rheinmetall slid 5.9%, after the company’s projection for 2025 sales growth landed below what some analysts had penciled in. That move dragged the pan-European aerospace and defence index lower by 2.8%, according to Reuters.
“There is a chance that the Iran war will not be done and dusted quickly,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, speaking to Reuters. Citigroup strategist Beata Manthey flagged that if elevated input costs persist, disrupted commodity flows could make it “hard to protect” margins. Reuters
A day before, the mood flipped. The STOXX 600 in Europe logged its sharpest single-day gain since April 2025—investors were betting the conflict could cool down. BlackRock Investment Institute’s Jean Boivin and his team wrote the shock would probably play out over “weeks, rather than in months or days.” Reuters
BAE continued quietly repurchasing shares. According to a March 9 filing, the company picked up 99,742 ordinary shares for cancellation on March 6, paying an average price of 2,195.68 pence apiece. That brings total shares bought back under the second tranche to 18.5 million.
Still, the underlying demand is sticking around. Last week, Reuters said BAE, Lockheed Martin, and RTX were summoned to Washington, as the Pentagon looked to top up its munitions stocks following strikes on Iran. Officials are now floating an additional $50 billion in U.S. spending.
The trade isn’t all upside. Barclays has cautioned that if oil holds at $100 a barrel, the STOXX 600 might slip to around 550, with Europe vulnerable to fuel shocks and weaker growth. That means BAE could see some investors lock in profits soon—even as military demand remains steady.
So far, this shift appears to mark a broader reset for the sector rather than a blow to BAE’s projections, with growth targets and the buyback staying put. Yet with defense stocks having surged recently, BAE’s shares could stall unless new contracts materialize or there’s clearer funding guidance out of Britain or the U.S.
