(new: prices)

FRANKFURT/PARIS/LONDON/MILAN/NEW YORK (dpa-AFX) - Shares in the defense sector were largely bought on Monday, bucking the general downward trend across European stock markets. These stocks were also in demand in New York, as they are seen as potential beneficiaries of the escalating conflict in the Middle East.

In the MDax, Hensoldt and Renk managed to defy the weak market with gains of 4.9 and 3.5 percent, respectively. Shares of submarine manufacturer TKMS slipped by 0.8 percent, but still ranked relatively high in the index of mid-sized German listed companies. The same applied to defense group Rheinmetall in the leading Dax index, despite its 1.8 percent loss.

"The attacks by the USA and Israel on Iran and the subsequent retaliatory strikes are likely to focus investors' attention on missile defense systems," wrote analyst Charles Armitage of Citigroup. He also expects the United States to increase its defense spending. Among others, he named the Iris-T SLM systems produced by Diehl and Hensoldt, as well as the Skyranger system from Rheinmetall.

"The escalation of tensions in the region should provide further support for shares of the European defense sector," wrote Chloe LeMarie of investment bank Jefferies. The conflict adds to the already numerous geopolitical tensions worldwide.

Defense stocks were also in demand across Europe. Shares of BAE Systems topped the winners' list in the British FTSE 100 with a 5.1 percent gain, reaching a record high. With 50 percent of its sales generated in the USA, the broadly diversified arms producer would benefit most among European manufacturers from increased US defense spending, according to Charles Armitage of Citigroup.

French peer Thales saw a 0.9 percent gain, enough to secure one of the top spots in the French Cac 40. The company develops radar systems, among other things, and supports armed forces in securing critical infrastructure. In Milan, shares of Leonardo rose by 3.3 percent. The technology group produces helicopters and military aircraft, as well as electronic surveillance systems.

In the USA, defense stocks RTX gained 3.6 percent and Lockheed Martin rose by 2.2 percent. Lockheed supplies the US Army with the THAAD missile defense system./bek/tih/gl/nas/jha/