ST Engineering, Asian defence peers rally as Middle East conflict deepens, but war not seen as a spending catalyst

[SINGAPORE] Asian defence counters have surged as the Middle East conflict entered its fourth week, with analysts expecting further upside after strong gains in 2025.

However, the longer-term trajectory for defence spending remains anchored to structural global drivers – including the US’ “America First” stance and Europe’s rearmament push – rather than any single conflict, they said.

“The war on Iran should not change the fundamental outlook for defence spending because countries who have not built or upgraded their defence forces were already in the process of budgeting this into their spending,” said Lorraine Tan, director of equity research in Asia at Morningstar.