Shares of German defense company Rheinmetall have declined significantly after the US proposed a peace plan to Ukraine, sparking concerns among investors about the potential end of the conflict. The proposed 28-point peace framework, discussed in Geneva, has led to a sell-off of shares in Rheinmetall, with the company’s stock falling by over 14% in the past five days. Similarly, defense-electronics producer Hensoldt has experienced a similar decline.

The decline in stock prices is attributed to investor fears that a peaceful resolution to the conflict could mark the end of the “super-cycle” for defense stocks. Germany has become Ukraine’s second-largest arms provider after the US, with Rheinmetall being a key supplier of military equipment. The company has reported surging profits for the first nine months of 2025, driven by the conflict and rising EU military budgets. Rheinmetall’s shares have climbed nearly 2,000% since the fighting escalated almost four years ago.

The European defense sector has been expanding rapidly, with a growth rate roughly three times its pre-2022 pace. Western leaders claim that the accelerated buildup is necessary to meet NATO readiness targets, maintain arms deliveries to Ukraine, and deter potential Russian threats. However, Moscow has dismissed these claims as “absurd” fearmongering aimed at justifying increased military spending and has condemned the West’s “reckless militarization.”

Rheinmetall’s CEO, Armin Papperger, has previously argued that even if the fighting were to end, it would be “wrong” for Europe to assume a peaceful future. The company has announced plans to build four manufacturing plants in Ukraine, highlighting its commitment to the region. As the situation continues to unfold, investors will be closely watching the developments and their potential impact on the defense industry. The proposed peace plan has significant implications for the industry, and its outcome may shape the future of defense stocks and the European defense sector as a whole.