South Korea's defense and military-industrial sector experienced a significant surge in share prices on Tuesday.
The leading defense contractor, Hanwha Aerospace, saw gains of up to 11.8%, while air defense system manufacturer LIG Nex1 came close to hitting the 30% daily upper limit on the KOSPI index during trading.
Industry experts attribute this rally to market expectations that the conclusion of regional conflicts will reopen export order channels for South Korean defense firms.
As hopes grow for an end to the Iran conflict, the market anticipates South Korean defense companies will benefit from military procurement orders from the Middle East, leading to a sharp rise in the sector.
In Seoul, top defense firm Hanwha Aerospace rose as much as 11.8% intraday. Hyundai Rotem, the manufacturer of the K2 "Black Panther" main battle tank, gained up to 12.67%. LIG Nex1 approached the 30% daily gain limit on the KOSPI, and ground combat vehicle parts supplier Firstec also neared the 30% upper limit.
A research report released on June 16th stated that investors are generally optimistic about an imminent recovery in South Korea's defense exports, with expectations for a sustained increase in procurement orders from the Middle East.
An analyst at DS Investment & Securities, Taeho Kang, believes the conclusion of the Iran conflict will serve as a major positive catalyst for South Korea's defense industry.
The "Cheongung" medium-range surface-to-air missile system (M-SAM), developed by LIG Nex1, made its combat debut in the United Arab Emirates during the recent Iran conflict.
Analysts note that this interceptor missile's performance is comparable to the PAC-3 interceptor used with the US Patriot system, but its procurement cost is only one-third of the PAC-3's publicly quoted price of $4 million.
Analyst Kang explained the positive industry logic with examples: previously stalled military trade negotiations between Hanwha Aerospace and Saudi Arabia are set to resume, and Hyundai Rotem is advancing talks to export 250 K2 main battle tanks to Iraq. He stated, "With the conflict's end, the resumption and finalization of these negotiations make securing large defense export orders a high-probability event."
He added, "The K2ME export variant of the main battle tank, specifically developed for the Middle Eastern market, has completed all development work. We expect the related procurement contracts will most likely be formally signed in the second half of 2026 or the first half of 2027."
It is reported that Hyundai Rotem officially launched the K2ME export model main battle tank in March of this year, clearly targeting the Gulf region as a core market for its armored equipment.
In an interview, Vikas Pershad, Asian Equities Portfolio Manager at M&G Investments, stated that current investors are placing greater emphasis on the long-term demand fundamentals of the defense sector.
He said, "National defense spending is driven more by long-term strategic positioning than by single geopolitical events, and this industry trend has not changed."
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