- European stocks exceed 600-point mark.
- Defence shares drive major surge today.
- Key defence stocks lead gains sharply.
- Broader market hits record highs.
The market's assumption that defense expenditures will increase structurally is indicated by the post-holiday jump, even if the sector has recently declined due to rumors about a ceasefire between Russia and Ukraine.
The European STOXX 600 (.STOXX) opens in a new window and closes above 600 points for the first time, up 0.9% at a record 601.76. Opening a new tab, the defense index (.SXPARO) rose 4.1% to its highest level in nearly three months.
Danni Hewson, head of financial analysis at AJ Bell, referring to the 600-point milestone said:
"It demonstrates that, despite the geopolitical instability around the globe, investors feel confident in the way markets are progressing."
A few powerful defensives, including Nestle (NESN.S), which opens a new tab, and Unilever (ULVR.L), which both fell by roughly 3%, slowed the day's gains.
The European Energy Index (.SXEP) began a new tab gain of 0.8% as oil prices jumped by nearly 1% and traders assessed the possible impact on oil flows from the U.S. arrest of Venezuelan President Nicolas Maduro.
Furthermore, there was a 2.3% increase in basic resources (.SXPP), opens new tab, and a 3.7% increase in technology (.SX8P), opens new tab.
The defense company Rheinmetall (RHMG.DE) led the index with a 9.3% increase, and Germany's stock benchmark (.GDAXI), opens new tab), also hit a record high and was most recently up 1.3%.
"Venezuelan oil supply is unlikely to move global energy markets meaningfully in the near term. Even under optimistic assumptions, it will take years to rehabilitate the country's energy sector,"
said Landon Derentz, vice president of energy and infrastructure at Atlantic Council Global Energy Center, a think tank.
Investors are focusing on central banks and monitoring incoming data for signs of potential rate reduction, in addition to monitoring the situation in Venezuela.
Meanwhile, miners Glencore (GLEN.L), Rio Tinto (RIO.L), and Anglo American (AAL.L) benefited from increased copper prices.
It is the world's biggest supplier of machinery for producing computer chips. Analysts at brokerage Bernstein upgraded the stock from "market perform" to "outperform" and raised their price target for the shares from 800 euros to 1,300 euros.
What macro events triggered the surge in defence stocks?
U.S. military strikes on Venezuela on January 4, 2026 capturing President Nicolás Maduro served as the primary macro detector for the European defense stock swell on January 5.
President Trump's post-operation rhetoric aboard Air Force One escalated pressures by linking the raid to" public security requirements" like adding Greenland from Denmark( a NATO supporter), raising fears of U.S. unilateralism dismembering alliance pungency and egging European rearmament; this compounded ongoing Russia- Ukraine waste and Middle East volatility.
Investors rotated into Rheinmetall, BAE Systems, Saab, and Thales up 3- 5 anticipating NATO budget hikes amid post-holiday thin liquidity, with STOXX Europe 600 Aerospace & Defense indicator gaining 4.1, its strongest day since November 2025.