LONDON, March 20, 2026, 20:54 GMT
BAE Systems shares, traded in London, lost 2.5% to close at 2,250 pence on Friday—outpacing the FTSE 100’s 1.4% slide as aerospace and defence stocks took a bigger hit in the selloff. The stock now sits roughly 4.7% under the 52-week peak of about 2,360p set just earlier this week.
BAE stands out lately, with investors piling into defense plays as the Middle East conflict worsened. On March 2, its shares soared 6%—oil prices spiked and bets mounted on bigger weapons orders. But by Friday, the same turmoil was rattling markets on a broader front, fanning anxiety about inflation, oil, and rates.
This week, Britain injected fresh momentum into the sector’s demand narrative. Officials said the government is ramping up aid for Gulf partners facing Iranian attacks, placing new missile orders with Thales UK and holding talks with suppliers—BAE, MBDA, Leonardo UK—about speeding up shipments of defense equipment and technology.
Company headlines were quieter. BAE announced plans Thursday to offload its last 6.9% holding in Kazakhstan’s Air Astana, a sale pegged at around $31 million based on the placement price. That move wraps up BAE’s departure from a business the airline itself called non-core for the group.
There’s still a strong case here. Back in February, Chief Executive Charles Woodburn called it a “new era” for defence spending as BAE logged a 12% bump in operating profit and notched a record 83.6 billion-pound order backlog. The company projected sales growth of 7% to 9% by 2026, with operating profit expected to climb 9% to 11%. Reuters
There’s still room to run, analysts say. This week, Citigroup’s Beata Manthey described European defence stocks as shifting into a “strong structural addition” for portfolios, not just a temporary refuge from geopolitical risk. Names like Rheinmetall and Babcock have been standouts during the sector’s climb, she noted. Even so, Babcock dropped 4.5% in London trading on Friday—one more sign that the whole group isn’t immune to volatile swings. MarketWatch
Rates weighed heavily right out of the gate. The Bank of England left its benchmark at 3.75% on Thursday, but flagged inflation as the main threat, not sluggish growth. That shift had traders quickly assigning about a 70% probability to a quarter-point hike in April, with up to three such moves penciled in by year-end.
The rally’s looking shaky. Europe’s defence index dropped 3.2% on Friday, making it one of the region’s worst performers. Capital Economics’ Franziska Palmas flagged that policymakers could hike rates as soon as April. For BAE, the shares are caught in the middle—military demand is rising, but the equity environment’s turning rough.
