Defense Stocks Rise as Russian Drones Enter Poland’s Airspace

Russia launched hundreds of drones and cruise missiles Tuesday evening, some of which entered Poland. (Chris McGrath/Getty Images)

Russia escalated geopolitical tensions, flying military drones into Polish airspace during an attack on Ukraine. That “act of aggression” had shares of defense contractors moving, again.

The attack occurred on Tuesday evening, with Russia launching hundreds of drones and cruise missiles. Some entered Poland, a NATO member, which borders Ukraine to the west.

The Ukrainian military intercepted most. Poland and other NATO forces also shot down numerous drones that had entered Polish airspace, noted Vertical Research Partners analyst Rob Stallard in a Wednesday report. “The Polish Government called the incursion an act of aggression, while Ukraine’s President Zelensky noted that this is an extremely dangerous precedent for Europe.”

Shares of European defense contractors Rheinmetall rose 3.3%, while those of Thales were up 3% in Wednesday trading. Shares of Leonardo and BAE Systems, meanwhile, were up 2.4% and 2.2%, respectively.

Coming into Wednesday trading, those four stocks were up almost 100% this year on average, boosted by promises by European governments to spend more on defense, partly in support of Ukraine.

Shares of unmanned technology providers AeroVironment and Kratos Defense & Security Solutions rose 7% and 1.7%, respectively, on Wednesday, while the S&P 500 rose 0.3% and the Dow Jones Industrial Average fell 0.5%.

AeroVironment shares were also impacted by the company’s Tuesday evening earnings report. The company reported better-than-expected sales and maintained its full fiscal year 2026 guidance.

Coming into Wednesday trading, AeroVironment and Kratos shares were up 50% and 145%, respectively, boosted by an increased focus on unmanned systems at the Defense Department, which has helped investor sentiment.

Geopolitical tensions and higher defense spending in the U.S. and around the world have helped most defense stocks. Coming into Wednesday trading, the iShares U.S. Aerospace & Defense ETF was up 35% this year. Shares of major U.S. defense contractors were up about 23%. In that group, which includes Northrop Grumman and General Dynamics, only Lockheed Martin stock was down, falling about 6%.

Northrop, Lockheed, and General Dynamics make unmanned systems and systems to defend against drone and missile attacks. As large, diversified suppliers, their stocks didn’t move as much. They added about 1% on average on Wednesday.

Write to Al Root at allen.root@dowjones.com