LONDON, March 18, 2026, 18:13 GMT
Shares in BAE Systems barely budged Wednesday, as the British defense contractor reported new U.S. Air Force work related to the U-2 spy plane. The stock was last seen at 2,329 pence in delayed London trading, off just 0.04%.
Even with only a slight uptick, the shift caught attention. Investors continue to shell out for fresh defense contracts, capitalizing on a surge in military budgets. Back in January, Reuters noted that Europe’s aerospace and defence index jumped roughly 55% over the past year as governments ramped up spending, eyeing stricter NATO requirements.
Last month, BAE handed investors more reasons to stick with the stock. Full-year operating profit climbed 12%. The order backlog? A record 83.6 billion pounds. BAE is also projecting more gains in sales and profit for 2026. Chief Executive Charles Woodburn described the moment as a “new era of defence spending.” Reuters
The U-2 award announced Tuesday falls in line with previous deals. BAE is set to provide software updates for the AN/ALQ-221 Advanced Defensive System, the electronic-warfare suite that alerts crews to threats and boosts aircraft protection. The upgrades are aimed at sharpening situational awareness and enhancing self-defense. “It’s part of our long legacy in electronic warfare,” said Tim Angulas, BAE’s U-2 product area director. BAE Systems
This goes beyond just BAE. Citi strategist Beata Manthey, in commentary flagged Wednesday, noted that investors are starting to treat defence stocks as more permanent fixtures in portfolios. Germany’s Rheinmetall and Britain’s Babcock have both seen gains recently.
Wednesday delivered a sharper blow to markets than to the stock itself. The FTSE 100 slipped 0.9%, while the STOXX 600 shed 0.70%. Brent crude shot up 4.75%, ending at $108.33 a barrel, after news broke of the first strike on Iran’s Pars gas field. “Another wake-up call,” is how Michael Brown, senior research strategist at Pepperstone, put it—pointing out that some investors had bet the Middle East shock would soon fade. Reuters
Here’s the rub for BAE holders. Defence stocks might see firmer earnings momentum than broader industrials, but that doesn’t mean they’re safe if hype outpaces results. Just look at Rheinmetall—shares dropped over 7% last week after its 2026 profit and cash-flow guidance landed short of investor hopes.
BAE shares are hanging onto gains for now. Even after Wednesday’s slip across London stocks, they’re trading at 2,329 pence—still clear of the 52-week high of 2,298 pence reached last Thursday.
