Shares of weapons giant Rheinmetall have slumped after Washington proposed terms to Kiev to end hostilities

The prospect of a possible peace in Ukraine has caused "panic" among investors in the German defense industry, sending stocks of arms manufacturers such as Rheinmetall tumbling.

The US reportedly handed Kiev a 28-point peace proposal last week and gave it until Thursday to respond. The framework was discussed in Geneva on Sunday, with US President Donald Trump saying afterwards that "something good" may be happening.

The peace push immediately unnerved investors, triggering a fierce sell-off of shares in Rheinmetall, Germany's largest arms manufacturer and a key supplier of military equipment to Kiev. Rheinmetall stock has fallen by over 14% over the past five days, with defense-electronics producer Hensoldt recording a similar drop.

"Investors fear that an end to hostilities could also mean the end of the "super-cycle" for defense stocks," Boerse-Express wrote.

Germany has become Kiev's second-largest arms provider after the US, and Rheinmetall, which produces tanks, artillery systems, and ammunition, recently reported surging profits for the first nine months of 2025, alongside a record order backlog driven by the conflict and rising EU military budgets. Company shares have climbed nearly 2,000% since fighting escalated almost four years ago.

During the previous US attempt to broker peace in February, Rheinmetall CEO Armin Papperger argued that even if the fighting were to end, it would be "wrong" for Europe to assume "a peaceful future." In 2024, the company announced plans to build four manufacturing plants in Ukraine.

The broader European defense sector has been expanding at roughly three times its pre-2022 pace, Financial Times reported in August. Western leaders claim the accelerated buildup is needed to meet NATO readiness targets, maintain arms deliveries to Kiev, and deter what they describe as a potential Russian threat.

Moscow has called such claims "absurd" fearmongering aimed at justifying increased military spending and condemned what it calls the West's "reckless militarization."

(RT.com)