European stocks rose on Wednesday as another decline in oil prices eased inflation concerns, but the session’s strongest sector was an unlikely beneficiary of cheaper energy: aerospace and defence.
The STOXX Europe 600 gained about 0.4% to 645.04 in early trading, with most major regional markets moving higher.
Lower crude helped improve the macro backdrop after weeks of concern that expensive energy would force the European Central Bank into additional tightening.
Yet defence shares led the advance, with Sweden’s Saab and French military-imaging specialist Exosens among the stronger performers.
Cheaper oil removes one of Europe’s biggest macro risks
Brent crude slipped below $100 a barrel as Saudi Arabia restarted its East-West pipeline and prepared to resume exports from the Red Sea port of Yanbu. The pipeline had become increasingly important as a route around the Strait of Hormuz.
That matters particularly for Europe, where the Middle East conflict has pushed energy costs higher and complicated the ECB’s inflation fight.
Capital Economics economists, cited by The Wall Street Journal, have argued that household spending could remain resilient if energy prices avoid another sustained surge.
Euro-area consumer confidence nevertheless weakened in September as households absorbed higher fuel and utility costs.
Energy shares themselves gained about 0.8% despite weaker crude, showing that investors are not yet pricing a collapse in oil-company earnings.
Defence stocks become the unexpected market leader
The more unusual part of Wednesday’s move was the leadership.
Saab gained as aerospace and defence topped the STOXX 600 sector rankings. Bank of America analysts expect European defence-industry revenue to grow about 15% annually through 2030, driven by demand for air defence, missiles and radar.
They identified Saab among the companies with particularly strong order prospects.
Citigroup also raised its Saab price target to SEK628 from SEK527 this week, while retaining a Neutral recommendation.
Exosens has its own earnings catalyst. The company raised its 2026 guidance last week after a faster-than-expected expansion of night-vision production capacity and stronger demand for drone, counter-drone and surveillance technology.
It now expects revenue growth of about 20% and adjusted EBITDA growth of roughly 25% at the midpoint of its guidance.
Economic data adds another layer of support
Early September business surveys also offered encouragement, as Germany’s composite PMI jumped to 53.8 from 51.8, its strongest reading since October 2025. Services returned to expansion while manufacturing remained firmly above 50.
S&P Global economist Phil Smith said the data showed German businesses remaining resilient despite renewed inflation pressure from fuel and energy costs.
France also surprised positively, with its composite PMI rising to 51.2 from 48.5 as private-sector activity returned to growth.
Company moves were more mixed. German seed producer KWS dropped about 6% after annual sales missed expectations, while Adyen slipped around 2% after naming Klarna executive Niclas Neglen as its next finance chief.
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