European energy and defense stocks rallied sharply as U.S. and Israeli strikes on Iran triggered a flight to safety in global markets. Major energy companies including Shell, BP, and TotalEnergies climbed 3.5% to 7% in early trading, while defense contractors like BAE Systems and Leonardo posted gains of up to 7.5%.

Analysts expect the Middle East escalation to drive sustained gains in traditional defensive sectors. BAE Systems stands out as particularly exposed to U.S. defense contracts, generating roughly $1 million per THAAD missile through its infrared seeker technology. The company derives 44% of sales from the U.S. defense market, more than peers like Renk Group (25%) and Leonardo (23%).

Oil futures jumped over 8% to multi-month highs as markets priced in supply disruption risks. Citi analysts project Brent crude trading between $80-$90 per barrel this week, while Bernstein estimates a $5-$10 risk premium could push European gas prices higher. The Strait of Hormuz closure threatens roughly 20% of global oil flows, with market impact depending on disruption duration.