Stock Market Gains Amid Geopolitical Tensions

The increasingly advanced peace negotiations between Ukraine and Russia, as well as mounting pressure on European countries to increase defense spending, have led to gains in the financial markets. Interestingly, it wasn’t just traditional defense companies that saw their stock prices rise, but also companies seemingly unrelated to the sector!

Global Context

A few weeks ago the European Commission presented a proposal for funding the defense industry in the European Union. According to an analysis by Business Insider, the value of this program—assuming full commitment from member states to military investments—could reach as much as 800 billion euros.

The implementation of the program’s objectives is intended to ensure an average annual increase in defense spending across EU member states of 1.5% of GDP. The financing mechanisms include: a €150 billion loan package, additional support from the EU budget, and the exemption of such spending from fiscal constraints. As a result, member states will be able to increase their defense spending without affecting the official budget deficit and debt-to-GDP ratios specified in EU regulations.

Such a change could prompt many countries to revise their earlier budget decisions and reassess their investment plans. It is also possible that some governments will decide to step up their efforts to develop new military technologies, taking an active part in the international “arms race.”

In recent days, the Russian-Ukrainian conflict has once again made headlines—this time in the context of a potential ceasefire. According to Rzeczpospolita, during talks in Jeddah, Saudi Arabia, the U.S. and Ukrainian delegations reached an agreement on resuming U.S. support for Kyiv.

In addition, Ukraine accepted the Trump administration’s proposal for a 30-day ceasefire. The document was forwarded to Moscow, and Kyiv declared its full readiness to comply with it—provided that Russia also adheres to it.

Rheinmetall Continues to Grow

Among the companies posting record profits on the stock market is the German conglomerate Rheinmetall. Previously mentioned as one of the main beneficiaries of the stock market rally, it has achieved yet another historic result in recent weeks. The company’s shares, which surpassed the 1,000-euro mark for the first time on February 27, 2025, rose by more than 35% just two weeks later—on March 14—reaching a record high of 1,368.5 euros around 1:00 p.m. that day.

By comparison, according to data Google, the latest available stock valuation for Rheinmetall before the outbreak of the war in Ukraine was just under 97 euros. This represents an increase of over 1,300% over three years.

Such a spectacular result is a source of satisfaction not only for the company's management but also for long-term investors. This growth can be compared to the results of NVIDIA —the market leader in graphics processors, whose shares are currently valued at approximately 456 PLN each. To achieve comparable returns, an investor would have to purchase shares of NVIDIA shares at a price of about 30 PLN—which was last possible in May 2020.

A New Perspective on Valuation

According to data from the past 12 months, Bloomberg compiled recommendations from 20 capital market agencies (also cited by the website Bankier), 80% of which (16 out of 20) recommended buying shares of Rheinmetallshares. Another three institutions recommended holding the shares, and only one indicated the need to sell, estimating a target price of 840 euros.

Currently, a valuation of 840 euros seems somewhat pessimistic—at least based on what we know today. But what were the optimistic forecasts? We know that the 1,200-euro mark—which was the forecast—has already been exceeded Warburg Researchand, incidentally, the median of the collected forecasts.

Among the most optimistic forecasts were those presented by DZ Bank (1,380 euros) and Bankhaus Metzler (1,450 euros). Meanwhile, Michał Kubicki’s analysis indicates that the average of 20 market recommendations was 1,211.87 euros—a figure that was nearly reached as early as March 5, when the share price of Rheinmetall share price exceeded 1,200 euros for the first time.

Gains on the Warsaw Stock Exchange

Interesting news is also coming in from the Polish stock market. As Jacek Frączyk of the editorial staff at Bankier, the rise in stock prices is affecting not only companies closely tied to the defense sector, but also entities that are not directly associated with the “arms race.”

One such company is Lubawa — a manufacturer of specialized technical fabrics, tents, helmets, bulletproof vests, and occupational safety equipment, which is primarily supplied to uniformed services such as the military and police. While the company’s stock price saw its biggest increase following the outbreak of the war in Ukraine, in January 2025 the price per share exceeded 5 PLN for the first time. By the end of February, that figure had already risen to over 6 PLN, and in recent days the price has stabilized at a level exceeding 8 PLN.

Another example is Jastrzębska Spółka Węglowa, the country’s largest producer of coking coal. Since March 7, its stock price has been rising steadily, and on March 14, it reached 28 PLN per share. The last time the company recorded such a price was in early November of last year.

A similar trend can be observed in the case of Budimex —one of Poland’s leading construction companies. As recently as March 4, the company’s shares were trading at around 515 PLN, but the latest quotes show an increase of as much as 25%, reaching a high of 645.5 PLN today. The previous time the 600 PLN threshold was exceeded occurred even earlier than in the case of JSW — Budimex had previously reached this level in mid-October 2024.

Summary

Early March gave us the opportunity to closely follow the rapid growth of the defense sector. Decisions by the European Commission have opened up new financing opportunities for many companies and have also significantly increased public interest in defense-related issues.

In addition, a potential 30-day ceasefire between Ukraine and Russia could be seen as providing Europe with additional time to prepare—a resource that generally proves valuable. On the other hand, a reduction in the immediate sense of threat could lead to a decline in public interest in this issue, which in turn could result in reduced activity among international investors.

For now, we can only hope that the increases we’ve seen are just the beginning of broader efforts by the European Union to promote defense among its member states. Continuing these efforts could benefit an even greater number of companies—including those that, at first glance, are not associated with the defense industry.