Defense stocks also plunge as markets slide, with ‘prospects for an end to the Iran war’ weighing on shares [Stocks NOW]

[Financial News] As South Korea’s stock market plunges, defense stocks are posting steeper losses than the broader market.
Hopes for an end to the Iran war are spreading, while concerns that Democrats’ control of both the House and Senate following the U.S. midterm elections could put the brakes on the Trump administration’s plans to expand the defense budget appear to be weighing on investor sentiment.
As of 10 a.m. on the 5th, Hanwha Systems Co., Ltd. was trading at 57,700 won, down 7.53% from the previous trading day. LIG Nex1 was also down 7.85%, at 387,500 won.
Hanwha Aerospace was trading at 705,000 won, down 4.08%; Hyundai Rotem Company was at 77,000 won, down 3.63%; and Korea Aerospace Industries (KAI) was at 107,100 won, down 1.56%. At the same time, the KOSPI and KOSDAQ were down 3.84% and 3.23%, respectively.
Headwinds from the United States are behind the weakness in defense stocks. On the U.S. stock market on the 4th (local time), Lockheed Martin fell 6.9%. Northrop Grumman also dropped about 4.5%, and shares of major defense contractors weakened across the board. The declines reflected concerns that Democratic control of Congress could lead to tougher congressional scrutiny of the defense budget and new weapons-system programs.
In particular, the Trump administration’s proposed defense budget for fiscal 2027 totals $1.5 trillion, far above the currently approved budget of $901 billion. However, observers say that with Democrats in control of Congress, the proposed increase could be scaled back during the budget review process. 
Expectations of easing geopolitical tensions surrounding the Iran war also weighed on defense stocks at home and abroad. The balance of power shifted after the U.S. midterm elections, boosting hopes for an end to the war, while international oil prices also fell. For defense companies that had relied on a prolonged war and rising weapons demand to drive share-price gains, this could weaken the short-term investment case.
However, it is too early to conclude that this trend has undermined the defense industry’s structural growth drivers. Demand for military modernization and replenishment of ammunition stockpiles in the United States remains in place, and some programs, including the modernization of nuclear forces, have bipartisan support.
Ultimately, short term, hopes for an end to the war and the actual direction of U.S. defense budget allocations are seen as factors that will shape the outlook for defense stocks; over the medium to long term, rearmament demand across countries and order backlogs will be key.
[email protected] Kang Jung-mo Reporter