After US President Donald Trump said NATO countries should shoot down Russian aircraft that violate their airspace, defense shares across Asia moved higher. According to Bloomberg, the reaction is further evidence that geopolitical risks are back at the forefront for investors.
South Korea leads the rally. Korean names were the standout performers. Shares of Hanwha Aerospace Co.—the country’s largest defense contractor, which, Bloomberg notes, has been in talks with several Western European nations about helping expand their arms-production capacity—jumped as much as 5.9% to a record high. Korea Aerospace Industries Ltd. and Hyundai Rotem Ltd. rose at least 4% each.
Japan and Australia aren’t far behind. In Japan, IHI Corp. gained more than 6%, placing it among the top performers on the Topix index, while Mitsubishi Heavy Industries Ltd. advanced over 3%. In Australia, DroneShield Ltd. surged by more than 7%.
A global tilt toward defense. As Bloomberg observes, defense has been a “hot trade” on global markets for months: elevated geopolitical tensions and expectations of larger military budgets are fueling interest in the sector. The MSCI World Aerospace & Defense Index is up 51% in 2025, handily outpacing a gain of nearly 17% for a broader global equities benchmark.
“Trump’s comments signal that geopolitical risks are back in the spotlight, and this is pushing defense stocks higher. With no signs of de-escalation, the market expects defense companies’ order books to stay full for the next few years,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global Pte, Bloomberg reports.
Europe in focus. When European trading opens, investors’ attention is likely to center on producers of armor, missiles, and aircraft, including Germany’s Rheinmetall AG, Norway’s Kongsberg Gruppen ASA, France’s Dassault Aviation SA, the UK’s BAE Systems plc, Italy’s Leonardo SpA, and Sweden’s Saab AB.
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