STORY: Investors have recently cooled their interest in European defense stocks.
Profit taking and stretched valuations have joined with growing uncertainty about the future of warfare.
That as the Iran conflict has again shown the effectiveness of low-cost drones.
MSCI's Europe Aerospace and Defence Index fell just under a tenth in March - its biggest monthly fall in five years.
Defense stocks usually rally at the outbreak of war, but that hasn't happened since the Iran conflict began in February.
Shares in Czech arms maker CSG have dropped almost a third since the conflict began.
While Germany's Rheinmetall is down 10% and Sweden's Saab about 12% lower.
European defense stocks have been among the market's strongest performers since Russia full-scale invation of Ukraine four years ago.
They've gone up more than 450%, compared with a roughly 40% gain for the MSCI Europe index.
The rally was fueled by pledges from European governments to boost defense spending.
And by Germany loosening fiscal rules last year to push its rearmament drive.
But order intake has been slower than some investors expected.
Analysts argue contracts have faced delays or been phased due to fiscal pressures in countries like France and Britain.
The Iran conflict has shown again both the cost and intensity of modern warfare.
Gulf states have fired hundreds of U.S.-made Patriot anti-missile interceptors priced at about $4 million each.
The conflict has renewed focus on cheaper military solutions seen in the Ukraine war.
Those include attack drones and interceptors like the Ukrainian-designed interceptor from Japan's Terra Drone.
Some European defense groups are investing heavily in drones, as well as surveillance and counter-drone systems.
Analysts say the long-term case for European defense stocks remains solid despite the corection.
Especially with government spending commitments still rising and fund flows suggesting selective buying on weakness.
