Hanwha Aerospace closed 3.47 percent higher at 1,224,000 won on Wednesday, extending its weekly gain to 21 percent. Shares of LIG Defense & Aerospace, Hyundai Rotem and Hanwha Systems slipped slightly from a day earlier after recent rallies.
The gains accelerated after details emerged of a U.S.-Iran agreement to end the conflict and a timetable for its formal signing.
While an end to hostilities is often considered negative for defense stocks because it could reduce weapons demand, analysts say this conflict has created a different dynamic.
The war exposed vulnerabilities in the Gulf's air-defense networks, rapidly depleted missile inventories and highlighted the high cost of defending against relatively cheap drones and missiles.
That could ultimately benefit South Korean defense companies, which already have sizable order backlogs and are pursuing major contracts across the Middle East.
"One of the traditional misconceptions about the defense industry is that share prices will inevitably fall when a war ends," Kang Tae-ho, an analyst at DS Investment & Securities, said.
Kang said the end of the Iran conflict could instead become a positive turning point because greater regional stability would allow delayed export negotiations to resume.
The Middle East remains one of the world's largest arms markets.
Although the region's arms imports fell 13 percent between 2016-20 and 2021-25, it still accounted for 26 percent of global imports of major weapons during the latest five-year period, according to the Stockholm International Peace Research Institute.
Saudi Arabia, Qatar, Kuwait and the United Arab Emirates alone represented about 19 percent of global arms imports, or nearly three-quarters of the Middle East's total share. Saudi Arabia was the world's third-largest arms importer and Qatar ranked fourth, while Kuwait placed ninth.
The figures also illustrate the Gulf's heavy dependence on U.S. weapons systems.
The United States supplied 77 percent of Saudi Arabia's arms imports, 62 percent of Kuwait's, 48 percent of Qatar's and 42 percent of the UAE's during the period.
But the war underscored the financial and operational risks of that dependence.
Waves of relatively inexpensive Iranian drones and missiles forced Gulf states and U.S. forces to deploy interceptor missiles costing millions of dollars apiece, rapidly draining inventories and exposing the difficulty of sustaining such a defense over a prolonged conflict.
"Everyone started doing the maths. It simply doesn't make economic sense," Toru Tokushige, chief executive of Terra Drone, told a U.S.-based media outlet.
A ground-launched Patriot interceptor costs roughly $4 million, compared with as little as $20,000 for an Iranian-designed Shahed drone.
The conflict created an immediate need to replenish missile inventories and strengthen regional command systems.
In May, the U.S. administration invoked emergency authority to approve more than $8.6 billion in arms sales to Middle Eastern allies without the usual congressional review process.
Analysts say Gulf governments are unlikely to abandon U.S. systems, but they are expected to diversify suppliers, add cheaper interceptors and build more layered defense networks to reduce the risk of shortages and long delivery times.
The Arab Gulf States Institute said supplier diversification had become "an operational necessity" rather than simply a diplomatic choice because of global interceptor shortages and limited production capacity.
It said Gulf states were shifting away from dependence on a small number of expensive platforms toward what it called "system-of-systems resilience," combining long-, medium- and short-range interceptors with counter-drone weapons, sensors, radars, electronic warfare systems and integrated command networks.
The conflict also weakened confidence in the broader U.S. security umbrella.
A report published by EMERiCs said the war had "exposed the limits of relying on the United States as a single supplier," as interceptor shortages and production bottlenecks made rapid replenishment difficult.
Gulf governments are therefore expected to maintain security ties with Washington while expanding defense cooperation with other countries and engaging Tehran to reduce the risk of another confrontation.
The Arab Gulf States Institute identified South Korea's Cheongung-II medium-range surface-to-air missile system as a potential beneficiary, saying it could provide an affordable middle layer between strategic systems such as Patriot and shorter-range point-defense systems.
LIG Defense & Aerospace, Hanwha Aerospace and Hanwha Systems all participate in the Cheongung-II supply chain.
Kang also said Kuwait and Qatar, both of which came under direct Iranian attack but have not yet purchased the system, could emerge as new customers. DS Investment & Securities estimates that potential Cheongung-II contracts with each country could be worth about 1.5 trillion won.
Additional orders could also come from existing customers, while Saudi Arabia and the UAE may consider South Korea's longer-range L-SAM system.
Analysts note that the end of the war is unlikely to erase regional security concerns, as Iran retains much of its missile capability and armed groups such as Hezbollah and the Houthis remain active threats across the Middle East.
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