Thales: After Iran’s attack on Israel, the actions of defense groups are progressing a little

(BFM Bourse) – Thales and Dassault Aviation gained ground this Monday on the stock market without rising sharply.

Renewed tensions in the Middle East traditionally tend to support defense groups on the stock market. This is particularly what was observed at the beginning of October, following the Hamas attack on Israel.

Shares in the sector are rising following information of this nature, as investors anticipate increases in orders due to increased geopolitical tensions or are simply positioning themselves on these stocks for their defensive nature.

However, if the events that occurred during this weekend in the Middle East indeed provide support for defense stocks on the stock market this Monday, it appears to be moderate.

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In Paris, the defense and technology group Thales gained 1% and the Rafale and Mirage producer Dassault Aviation gained 1.6% shortly before 10:20 a.m., both stocks outperforming the CAC 40 (+0.5% at the same time). moment). In London, BAE Systems advanced by 0.8% while in Frankfurt, Rheinmetall, which supplies armored vehicles to the German army, advanced by 0.9%.

During the night from Saturday to Sunday, Iran carried out an unprecedented attack on Israel by launching more than 300 drones and missiles against the Jewish state. This offensive was a response to the attack in early April on an Iranian consulate in Damascus that Tehran had attributed to Israel.

The Israeli army said that 99% of Iranian shots were intercepted. On Sunday evening, Iran called on Israel not to retaliate.

In a note published Monday morning before the market opened, Jefferies stressed that this information should “in theory, strengthen the valuations” of defense groups on the stock market. However, the bank notes that this renewed geopolitical tension had already been anticipated last week and had not resulted in a rise in the sector’s stock prices. “This weekend’s events therefore constitute, in our view, a key test of defense valuation levels,” adds Jefferies.

Several financial intermediaries currently consider that the defense sector has limited potential on the stock market. For example, Rheinmetall shares rise almost 90% over the whole of 2024 and 529% over three years.

Last week, the bank Goldman Sachs wrote a note which underlined that these values ​​were “fully valued” on the stock market. Which had also weighed on the actions of the defense.

A limited risk of conflagration

The market also seems to put geopolitical risk into perspective following the attack on Iran, thus limiting the impact on defense values.

This is also illustrated by the virtual absence of reaction in oil prices. The June North Sea Brent contract lost 1.4% to $89.23 per barrel around 10:15 a.m.

“Several reasons explain this mixed reaction (from oil, editor’s note): the strike was widely expected and, now that it has occurred, it has not led to any disruption of supply,” explains Tamas Varga to BFM Bourse, oil specialist analyst at PVM Oil Associates.

“Furthermore, Iran said the mission had been accomplished, while the United States said it was not seeking to start a broader war with Iran, an unspoken message to Israel that it did not would not support the State in the event of an offensive against Iran. In short, an escalation does not seem plausible at the moment,” he adds.

Julien Marion – ©2024 BFM Bourse