Defense giants say investors should still bet on them, as hopes for a Russia-Ukraine peace deal spark a selloff

Some of Europe's biggest subject contractors urged investors not to currency retired of the assemblage connected Tuesday, arsenic stocks sold disconnected connected hopes of a bid woody betwixt Russia and Ukraine.

President Donald Trump's peculiar envoy Steve Witkoff and his son-in-law Jared Kushner joined bid talks with Ukrainian President Volodymyr Zelenskyy in Berlin implicit the weekend. Zelenskyy said during the talks that Kyiv was willing to springiness up its NATO rank ambitions successful bid to unafraid a woody to extremity the war.

American officials past told reporters a bid woody was adjacent to completion, portion U.S. President Donald Trump said negotiators were "closer present than we person been ever" to stopping the conflict. Talks are expected to proceed into the weekend.

A spokesperson for German defence premier Hensoldt said the institution hopes for "a conscionable and lasting bid for Ukraine," but added that, adjacent if this is achieved, Europe remains nether menace of attack.

"A cessation of hostilities would springiness Russia the accidental to reconstitute its subject capabilities. From a European information perspective, the underlying menace remains and could adjacent intensify," they said.

"Against this backdrop, defence readiness continues to beryllium a structural necessity for Europe," they added.

Hensoldt's typical said the company's concern vulnerability to Ukraine is limited, accounting for a single-digit percent of revenues. The company's stock, which has much than doubled successful worth this year, was past trading 4.6% lower.

"Our maturation trajectory is chiefly driven by large, semipermanent programs successful Germany and crossed Europe," the spokesperson told CNBC connected Tuesday morning, pointing to a three-digit-million-euro declaration to equip the German equipped forces' reconnaissance vehicles with bundle and precocious sensors, and projects nether the European Sky Shield Initiative.

Many of the firm's contracts volition proceed "in 2026 and beyond," they added.

A typical for German conveyance systems shaper Renk – a contractor to much than 70 armies crossed the globe – acknowledged "an elevated level of volatility" successful European defence stocks "anytime determination is quality surrounding a imaginable bid woody oregon ceasefire successful Ukraine."

They added: "While we would precise overmuch invited bid successful Ukraine for the Ukrainian people, we spot the menace script successful Europe and globally unchanged and highest since the extremity of the Cold War."

Renk's stock price, which has gained astir 194% year-to-date, was past seen trading 4.8% lower.

Renk, Hensoldt stock price

"Downward movements of the stock prices are powerfully driven by marketplace sentiment alternatively than by wide impacts connected the concern outlook of Renk and different defence peers," the company's spokesperson added connected Tuesday morning.

"European NATO members person committed to the 3.5% [spending] people until 2035, starring to a structural semipermanent maturation situation successful subject budgets," they said.

Europe's defence assemblage has seen a meteoric emergence this year, amid the Ukraine warfare and commitments from determination governments and the NATO subject confederation to ramp up defence spending.

The pledges are wide expected to boost European firms' bottommost lines, with regionally headquartered companies already reporting record bid backlogs and huge upswings successful income.

Since the commencement of the year, the Stoxx Europe Aerospace and Defense scale has surged much than 50%, with immoderate determination defence players much than doubling successful value.

Hensoldt and Renk's presumption that Russia volition proceed to airs a menace to the continent is shared by determination officials.

"We are Russia's adjacent target, and we are already successful harm's way," NATO Chief Mark Rutte said successful a code past week, portion Blaise Metreweli – the caput of the U.K.'s Secret Intelligence Service – warned successful a code connected Monday that the portion is facing "the menace of an aggressive, expansionist and revisionist Russia."

Christopher Granville, managing manager of TS Lombard, told CNBC's "Europe Early Edition" connected Tuesday that, portion the "end crippled phase" of the warfare appears to beryllium underway, wealth markets whitethorn beryllium mispricing this.

"The markets are pricing that successful the signifier of a bid dividend," helium added. "That tin beryllium seen successful the retracement of the stock prices of European defence companies, which person handily outperformed for the past 2 to 3 years and person pulled backmost – successful our view, that looks similar a buying opportunity, due to the fact that determination volition beryllium nary bid dividend."

Granville argued that this is due to the fact that Russia's narration with Europe has shifted.

"The result of the warfare volition beryllium that Russian subject powerfulness has secured an unreversed territorial alteration successful Europe, and that volition beryllium a immense inducement to amended European defence concern capacity, and proceed arms procurement," helium added.

He added that a "non-peace dividend" would beryllium reflected successful little hazard premiums, because, adjacent with the warfare over, "you inactive get the spending connected defence concern capacity."

— CNBC's Justin Papp and Holly Ellyatt contributed to this article.