LONDON, March 18, 2026, 18:13 GMT
BAE Systems shares were little changed on Wednesday after the British defence group said it had won fresh U.S. Air Force work tied to the U-2 reconnaissance aircraft, leaving the stock last quoted at 2,329 pence in delayed London trade, down 0.04%. 1
The muted move still stood out. Investors are still paying up for new defence work in a sector lifted by bigger military budgets, with Reuters reporting in January that Europe’s aerospace and defence index had gained about 55% over the previous year as governments raised spending and pushed toward tougher NATO targets. 2
BAE gave the market fresh reasons to stay in the trade last month. It posted a 12% rise in full-year operating profit, said backlog hit a record 83.6 billion pounds and forecast further sales and profit growth in 2026. Chief Executive Charles Woodburn called it a “new era of defence spending.” 3
Tuesday’s U-2 award fits that pattern. BAE said it will support the AN/ALQ-221 Advanced Defensive System — electronic-warfare gear that warns crews about threats and helps protect the aircraft — with software updates meant to improve situational awareness and self-protection. Tim Angulas, BAE’s U-2 product area director, said the system sits in the group’s “long legacy in electronic warfare.” 4
The trade is broader than BAE. Citi strategist Beata Manthey said in commentary highlighted on Wednesday that defence companies are becoming more structural holdings for investors, with Germany’s Rheinmetall and Britain’s Babcock among the recent gainers. 5
But Wednesday’s market was rougher than the stock. The FTSE 100 fell 0.9% and the STOXX 600 lost 0.70% after the first reported strike on Iran’s Pars gas field pushed Brent crude up 4.75% to $108.33 a barrel. Michael Brown, senior research strategist at Pepperstone, called the move “another wake-up call” for investors who had hoped the Middle East shock would fade. 6
That is the catch for BAE holders. Defence shares may have stronger earnings tailwinds than most industrials, but they are not immune when expectations get ahead of delivery: Rheinmetall fell more than 7% last week after its 2026 profit and cash-flow outlook missed what investors had pencilled in. 7
For now, BAE is avoiding that stumble. At 2,329 pence, the shares were still above the 2,298-pence 52-week high they set last Thursday, even after Wednesday’s broader wobble in London stocks. 1
