Shares in European arms makers surged on Monday, boosted by the prospect of higher defence spending in the region.
At a summit in London on Sunday, two days after Ukrainian President Volodymyr Zelenskiy clashed with U.S. President Donald Trump, European leaders agreed they must spend more on defence.
Separately, Reuters reported that parties in talks to form Germany's new government are considering setting up a defence fund.
Gains in defence stocks drove a broader gauge of aerospace and defence companies (.SXPARO) up more than 6% to a record high.
The index has more than doubled since Russia invaded Ukraine three years ago.
JPMorgan analysts said the events of the last two weeks have "turbocharged" their thesis of a European rearmament cycle, with Europe seeking to gradually make more of its own military equipment and import less from the United States
"There are 30 European countries in NATO and we expect many of them will soon commit to much higher defence spending," they said in a note.
Shares in Europe's biggest defence company BAE Systems (BAES.L) had risen around 15% by 0927 GMT.
Germany's Hensoldt (HAGG.DE), which provides sensor systems for the Eurofighter, jumped 22% to a record high. Leopard 2 tank maker Rheinmetall (RHMG.DE) rose 12%. Thyssenkrupp (TKAG.DE) and Renk (R3NK.DE) were up between 14% and 15%
Italy's Leonardo (LDOF.MI) jumped 11%, while Sweden's Saab (SAABb.ST) rose around 10%.
France's Thales (TCFP.PA) and Dassault Aviation (AM.PA) were up around 13% and 15%, respectively.
BofA Global Research analysts estimated that NATO members excluding the U.S. were expected to spend around $450 billion on defence in 2024, saying that if every country increased its spend to 3% of GDP, it would add $250 billion, a "significant step up in spend and outlook."
They added in a note that European defence stocks still looked "cheap" despite the rally, with the sector currently trading at around 11 times its Enterprise Value/EBITDA ratio in 2027 compared to 13 times for U.S. peers.
