Military-industrial frenzy sweeps the globe! After the crazy rise of European and American military-industrial stocks, it's now Asia's turn. South Korean Hanhwa Aerospace soared 22% in a single day.

After the end of the public holiday in the South Korean stock market and the resumption of normal trading, South Korean defense military stocks experienced a significant drop of over 3% in the South Korean benchmark stock index (Kospi index). However, during Tuesday's trading session, there was a significant increase across the board, with the main market logic being the outbreak of a new round of warfare involving the United States, Israel, and Iran in the Middle East, sparking a "super bullish frenzy" among investors for defense military stocks globally. In terms of specific stock price increases, Hanwha Aerospace, the largest defense military manufacturing giant in South Korea and a significant weight in the stock market, saw its stock price soar by 22%. Another major defense giant, Korea Aerospace Industries, saw its stock price rise by over 7%. In other core defense stocks, Lignex1, the largest manufacturer of defense systems in South Korea, saw its stock price surge by 30%. At the same time, Victek and Firstec, manufacturers of electronic warfare systems and core components of air defense missiles, saw their stock prices increase by over 20%. The well-known ammunition manufacturer Poongsan saw its stock price rise by 14%, and K2 main battle tank manufacturer Hyundai Rotem saw its stock price rise by over 18%. The strong rally in the South Korean stock market's defense sector contrasted sharply with the broader-based South Korean Composite Stock Price Index (Kospi), which at one point fell by over 4%, currently leading the decline in the entire Asian stock market. After the escalation of the conflict in the Middle East, the U.S. Defense Index strengthened. Old-school defense stocks such as Lockheed Martin and Northrop Grumman saw their stock prices rise. However, compared to the defense stocks in the European and American stock markets, the reason for the much stronger rally in South Korean defense stocks is also due to its relatively cheap valuation, accelerated growth in orders from Europe, and the accelerated localization of defense industries in Asia. In other words, geopolitical conflicts are catalysts, but valuation factors, defense budget expansion, and the pace of order fulfillment are the core variables determining the surge in stock prices in the global defense sector. Prior to the sharp drop on Tuesday, the Kospi index in South Korea had experienced a crazy 75% surge in 2025, and in 2026, it still ranked as the "world's most crazy stock market index" - with a year-to-date increase of over 50%, leading the global stock market. The Korean wave (K-Pop) can be said to have surged from the Seoul fashion circle to the global stock market. With the strong performance of the South Korean stock market and the Chinese market, global stock markets have shown historic differentiation: Asian stock markets continue to achieve outstanding performance, significantly outperforming the U.S. stock market and developed market benchmark indices. The themes of "AI panic trading" and "AI disruption of everything" are reshaping the asset allocation logic of global investors, driving global institutional and retail funds from the United States to Asia, which is considered the most concentrated participant in the artificial intelligence computing industry chain. The latest data shows that the MSCI Asia Pacific index rose over 7% in February, marking its best performance in February since the index was established in 1998. The Korean Stock Exchange has surpassed France to become the ninth largest stock exchange in the world. The current trading pattern in the stock market is very favorable for semiconductor and AI computing infrastructure stocks, rather than software stocks, as the former two are mostly located in emerging markets in Asia. Citrini Research's "Memo on the Prosperity Crisis of AI from the Future" is reinforcing a bet: as Asia has core chip manufacturers such as TSMC and numerous chip manufacturing companies and AI computing infrastructure manufacturers such as Foxconn, SK Hynix, and Samsung, the Asian AI computing infrastructure industry led by Korea and China will emerge as the biggest winner in the trend of "AI disruption of everything"; in contrast, the U.S. market's technology sector, with a higher exposure to software and light assets, is currently experiencing turbulence. A frenzy of military investments is sweeping the globe! With U.S. President Trump announcing a major military operation against Iran, and with the conflict spreading to Middle Eastern economies outside of Iran and Israel - such as Iran's attacks on key U.S. infrastructure in Dubai, Abu Dhabi, Bahrain, and Kuwait with drones and missiles, and Lebanon launching a new round of rocket strikes against Israel - the continued unpredictability of geopolitical turmoil in the Middle East and the potential ripple effects of rising oil prices have given fund managers new reasons to massively buy commodities and stocks that will benefit greatly from the geopolitical turmoil in the Middle East, such as crude oil and defense stocks. Since the outbreak of the Russia-Ukraine conflict in 2022, the importance of South Korean defense military giants in the global defense field has been increasing, and the proportion of South Korean defense technology in Western defense equipment has been expanding. The country's goal is to become the world's fourth-largest defense industrial superpower by 2030. Orders from European countries such as Poland and Romania have driven the "crazy rally" in the South Korean defense sector since 2025, mainly because the Trump administration has increasingly focused on the U.S. defense industry chain domestically and pressured European countries to significantly increase defense spending as a percentage of GDP. Otherwise, the U.S. will withdraw from NATO. European countries on the continent are significantly increasing their defense spending. Since the opening of global stock markets on Monday, as investors react to the escalating military competition in the Middle East, global defense stocks have generally risen. In Europe, Germany's defense giant Hensoldt and BAE Systems from the UK are among the best-performing defense stocks in the Stoxx 600 index, rising by nearly 5% and about 6%, respectively. In the U.S. stock market, Lockheed Martin, the creator of the F-35 fighter, with a market value of $150 billion, and Northrop Grumman, a core participant in intelligence systems for military-grade B-2 stealth bombers, rose by over 3% and about 6%, respectively. From the perspective of the defense industry chain, what is most worth noting in this round of action is not just the "precision bombing" itself, but that it once again proves that modern warfare is a competition of a complete kill chain: from intelligence, surveillance, reconnaissance (ISR), to command and control, to electronic warfare, drones, cruise missiles, stealth platforms, and anti-aircraft missile defenses. According to a report from a U.S. media outlet, in this strike against Iran, the U.S. once again deployed B-2 bombers, Tomahawk cruise missiles, and disposable attack drones, and even introduced AI-assisted tasks based on Anthropic's large model and AI proxy-style workflow. These military technological advances in themselves indicate that the full chain military capability of "perception-decision-strike" is being pushed to the forefront by modern geopolitical conflicts. Therefore, the real beneficiaries are often not just "aircraft stocks" or "tank stocks," but more towards missile and ammunition, radar and sensors, electronic warfare, anti-drone systems, anti-aircraft systems, military software, and autonomous systems, which are core defense technologies. The global defense sector as a whole continues to benefit from the logic of the U.S.-Iran military conflict, but the market tends to favor the sub-sectors of defense that can address the current pain points of war, rather than chasing the entire defense index. If this conflict persists, the strongest trading themes are likely to be anti-aircraft missile defense, low-cost interception, advanced drone/anti-drone systems, electronic reconnaissance and situational awareness, as these are the common demands highlighted on the current Middle East and Ukrainian battlefields; in turn, companies with higher exposure to civil aviation, slower government order fulfillment, and profit margins affected by fiscal constraints may not necessarily see their stock prices bounce in sync with the strong trend of defense stocks. In other words, it's not just a simple "war benefits defense sector" situation, but rather, "modern precise warfare benefits military assets with high technological content that can be quickly mass-produced and meet the demands of actual combat". These are all potential opportunities and risks in the rapidly changing global stock market, especially with the ongoing geopolitical tensions and military conflicts around the world. Investors need to carefully assess these factors and consider their investment strategies accordingly in order to make informed decisions in the market.