Defence and aerospace stocks, including BAE Systems PLC (LSE:BA.), QinetiQ Group PLC (LSE:QQ.) and Melrose Industries PLC (LSE:MRO) rose in London on Tuesday after the ramping up of attacks on Ukraine by Russia, analysts at JPMorgan said.
The US investment bank felt its share price expectations for most companies were probably too low.
Upward moves in European defence sector share prices on Monday and Tuesday were, the analysts suggested, "due to two major pieces of news over the weekend: expectations for the upcoming NATO summit [and] Russia’s latest attacks on Ukraine".
Many of the European defence companies covered have share prices that are above JPMorgan's share price targets, the analysts noted, so "we may need to revisit our forecasts in light of fast moving events".
But regardless of current price targets, "we would not be surprised to see the [European defence sector] continue to outperform the market in the coming month at least".
Over the long weekend, Donald Trump posted that Russian leader Vladimir Putin has "gone absolutely crazy", which political correspondents said was the US President's most forceful criticism of his Russian counterpart over the war in Ukraine.
It came after Moscow launched its largest aerial attack on Ukraine in a single night since the conflict began, killing at least 12 people and injuring many more.
A major geopolitical shift began to rumble earlier this year, with Europe sparked into a potentially massive rearmament cycle by comments from Trump's administration that Washington would no longer take responsibility for the continent's security.
This led to Germany's new government, under conservative Friedrich Merz, agreeing major new defence spending plans as it prepared for security "independence" from the US; the EU Commission laid out plans for €800 billion of extra defence spending; and UK prime minister Keir Starmer to pledge that defence spending would be ramped up over the next two years from the 2.3% to 2.5% pof GDP.