Shares in defence stocks such as Babcock International PLC (LSE:BAB) and BAE Systems PLC (LSE:BA.) led the FTSE 100 fallers on Monday, as Israel and Hamas exchanged hostages under the new ceasefire agreement, lowering tensions in the Middle East.
Babcock shares fell 2.5% and BAE by 1.2%, while QinetiQ Group PLC (LSE:QQ.) and Melrose Industries PLC (LSE:MRO, OTC:MLSPF) were down 1.4% and 0.6% respectively.
This continues a trend seen at the end of last week. Over five days, Babcock is down 6.5%, while BAE, Melrose, Qinetiq, Senior PLC (LSE:SNR), Rolls-Royce Holdings PLC (LSE:RR.), and Chemring Group (LSE:CHG) are all down between 3% and 2%, with Avon Technologies PLC (LSE:AVON) down 1.1%.
The ceasefire "is being seen as a ‘risk-premium release value’ rather than as a strategic driver", according to market analyst Daniela Sabin Hathorn at Capital.com.
As well as hailing the release of all remaining Israeli hostages held by Hamas in Gaza, President Donald Trump made a formal address to Israel’s parliament, the Knesset, just as the last of Israel’s surviving hostages are returned home after 737 days in captivity.
Last week saw oil prices slide, which the analyst puts down in part to the Middle East supply scare fading.
Analysts at Deutsche Bank noted that an expected pick-up in UK contracting is "unlikely before publication of the Defence Investment Plan, which is still slated for Autumn, although an FT article this week suggested slippage and is now 'hoped for by the end of the year'”.