Investors should still back us amid selloff

Some of Europe’s biggest military contractors urged investors not to cash out of the sector on Tuesday, as stocks sold off on hopes of a peace deal between Russia and Ukraine.

President Donald Trump‘s special envoy Steve Witkoff and his son-in-law Jared Kushner joined peace talks with Ukrainian President Volodymyr Zelenskyy in Berlin over the weekend. Zelenskyy said during the talks that Kyiv was willing to give up its NATO membership ambitions in order to secure a deal to end the war.

American officials then told reporters a peace deal was close to completion, while U.S. President Donald Trump said negotiators were “closer now than we have been ever” to stopping the conflict. Talks are expected to continue into the weekend.

European defense stocks sold off on Tuesday as investors weighed the news, with some big names extending losses from the previous day. By 11:40 a.m. in London (6:40 a.m. ET), the regional Stoxx Aerospace and Defense index was trading 2.2% lower, with Swedish fighter jet maker Saab leading losses on a 5.2% fall. Italy’s Leonardo, down 4.7%, and Germany’s Rheinmetall, last seen 4.5% lower, were also among those seeing the biggest declines.

A spokesperson for German defense prime Hensoldt said the company hopes for “a just and lasting peace for Ukraine,” but added that, even if this is achieved, Europe remains under threat of attack.

“A cessation of hostilities would give Russia the opportunity to reconstitute its military capabilities. From a European security perspective, the underlying threat remains and could even intensify,” they said.

“Against this backdrop, defense readiness continues to be a structural necessity for Europe,” they added.

Hensoldt’s representative said the company’s business exposure to Ukraine is limited, accounting for a single-digit percentage of revenues. The company’s stock, which has more than doubled in value this year, was last trading 4.6% lower.

“Our growth trajectory is primarily driven by large, long-term programs in Germany and across Europe,” the spokesperson told CNBC on Tuesday morning, pointing to a three-digit-million-euro contract to equip the German armed forces’ reconnaissance vehicles with software and advanced sensors, and projects under the European Sky Shield Initiative.

Many of the firm’s contracts will continue “in 2026 and beyond,” they added.

A representative for German vehicle systems manufacturer Renk – a contractor to more than 70 armies across the globe – acknowledged “an elevated level of volatility” in European defense stocks “anytime there is news surrounding a potential peace deal or ceasefire in Ukraine.”

They added: “While we would very much welcome peace in Ukraine for the Ukrainian people, we see the threat scenario in…