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The Bottleneck Shaking the West’s Resilience
Global Security returned 2.01% during the month of April. Geopolitical tensions and great-power rivalry are having an increasing impact on global trade and financial markets. Peace negotiations between the United States and Iran have created hopes of a ceasefire, the reopening of the Strait of Hormuz and possible sanctions relief. At the same time, we believe the market is underestimating how far apart the parties remain, particularly regarding Iran’s nuclear capability and its stockpile of enriched uranium. We also believe the market is underestimating the lagging effects of the shipping route having been closed for such an extended period. This could develop into a very serious energy crisis, while disruptions to other oil products, helium and aluminium could also affect global growth in 2026.
The situation in the Strait of Hormuz remains tense. The United States is attempting to reopen parts of the shipping traffic, but it is clear that this is difficult to achieve through military pressure alone and requires diplomacy. What supports a potential solution is that the global economy is being affected to such an extent that it is in the interest of China, the United States and other middle powers to reach an agreement. Iran has gained clear leverage, but if the country is unable to export its oil, it will be forced to store production, sell through more uncertain and discounted channels, or shut down parts of its production. This would quickly weaken the state’s cash flow, put pressure on the currency and reduce the regime’s ability to finance subsidies and regional proxy groups.
To understand the development, it is important to remember the starting point of the conflict from an Israeli perspective. Iran has long been viewed as an existential threat through its support for Hezbollah and Hamas, its ballistic missile programme and its explicit hostility towards Israel. The greatest risk of escalation has been the possibility of Iran developing nuclear weapons, which would change the strategic balance in the Middle East. There are also economic dimensions, where a weakened or transformed Iranian regime could, over time, open up opportunities for the United States and its allies within energy, infrastructure and industry.
In Europe, the conflict has also created new friction within NATO. Friedrich Merz has criticised the United States’ handling of the war, and the Pentagon has announced that around 5,000 troops will be withdrawn from Germany over the coming 6–12 months. This is a limited force in terms of size, but one with high capability and mobility. The United States has begun a drawdown in Europe, and the fact that the U.S. is now saying it will not deliver the Tomahawk missiles promised by the Biden administration increases the risks for Europe. Taurus, developed by Germany and Sweden, or Storm Shadow, developed by the United Kingdom and France, are alternatives, but production capacity is limited. Expectations and outcomes related to peace negotiations could potentially put short-term pressure on European defence equities. In the medium and long term, however, this strengthens the need for independent military capability, larger inventories, more air defence, more ammunition and industrial redundancy, alongside expected increases in U.S. production.
European defense stocks in the short term. However, in the medium and long term, it reinforces the need for its own military capability, larger inventories, more air defense, more ammunition and industrial redundancy, together with expected increased US production.
The negotiations concern a ceasefire, the reopening of Hormuz and possible sanctions relief, but the demands from the United States and Israel are considerably more far-reaching: restrictions on, or dismantling of, Iran’s nuclear capability, a halt to domestic enrichment and the handling of the country’s enriched material. Although the parties are reported to have moved closer to a framework for continued talks, the most difficult issues remain unresolved. Our assessment is therefore that a rapid and frictionless solution should not be taken for granted. The market has reacted positively to signals of diplomatic progress, but if the distance between the parties remains, the risk of renewed disruptions is still significant.
| April 2026 – Top performers | April 2026 – Bottom performers | ||
| ACSL | 72% | Kongsberg Group | -24% |
| Hyundai Rotem | 59% | CSG | -21% |
| Celestica | 45% | Northrop Grumman | -15% |
| Vincorion | 36% | Bittium | -13% |
| Planet Labs | 32% | AST Spacemobile | -11% |
Company-specific news
During April, several of the fund’s European holdings reported strong quarterly results, including Saab, Kongsberg and Indra Sistemas. A common theme across the reports was high organic growth, improved margins and continued very strong order books, driven by increased defence spending in Europe and NATO countries.
Kongsberg increased revenue by 26% to NOK 9.2 billion, while EBIT rose to NOK 1.5 billion and the margin improved to 16.6%. The order backlog reached a new record of NOK 152 billion, with a book-to-bill ratio of 2.9. During the quarter, the company signed, among other things, a major agreement for counter-drone systems for Poland and an order for PROTECTOR remote weapon stations for Germany and Sweden. The company has also become more focused following the spin-off of Kongsberg Maritime.
Saab reported organic sales growth of 23.6% and an EBIT increase of 32%. The operating margin improved to 10.0%, and the order backlog amounted to SEK 274 billion. Growth was broad-based, with particularly strong development in Surveillance and Dynamics. During the quarter, Saab also booked an order for Counter-UAS systems from the Swedish Defence Materiel Administration, reinforcing the view that counter-drone capabilities have become an increasingly important priority area.
Indra reported revenue growth of 14.6% and an EBITDA increase of 54.7%. The order backlog rose sharply to EUR 20.3 billion, driven by major defence contracts and the consolidation of the space companies Hispasat and Hisdesat. The defence segment was particularly strong, with clear growth in both revenue and order backlog. The company also confirmed its full-year guidance for 2026.
Outlook for defense companies
Overall, the reports show that demand within the European defence industry remains very strong. The companies are demonstrating high sales growth, improved margins and positive developments in production capacity and new products. Saab, Kongsberg and Indra are all benefiting from the same structural drivers: higher defence budgets, the need for greater industrial capacity and growing demand for air defence, ammunition, sensors, space capabilities and Counter-UAS solutions. This confirms our long-term view of the sector and the need for Europe to build a more independent defence-industrial base. We have also written a more detailed market commentary on the developments in Iran.
See the link below to read it: https://finserve.se/en/iran-konflikten-gor-kina-till-tyst-vinnare/
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