The European Defence shares dropped to their lowest level since late August, halting their strong run in this year. This was after Ukrainian President Volodymyr Zelenskiy stated that he is ready to work "honestly" on a U.S. backed plan to end Russia's war.

At 1004 GMT, an index of aerospace- and defence-related companies was down by 3.3%. It is on track to suffer its largest weekly loss since March. It was below the STOXX 600 Europe index which fell 1%.

The index has risen more than 200% in the past two years since Russia invaded Ukraine.

According to the U.S. plan, as seen by, Kyiv will be required to give the entire Donbas area up and drastically reduce its military. Ukraine's allies have long considered these conditions to be tantamount capitulation.

"Even though Europe may feel blindsided by (U.S. president Donald) Trump, and (Russian president Vladimir) Putin won't care. A Frankfurt-based trader said that it is possible the peace plan could succeed.

PROSPECTIVE HIGHER DEFENCE Spending

Renk shares in Germany fell by around 11% on their way to a sixth consecutive day of losses.

Hensoldt which makes sensor systems for Eurofighter, and Leopard 2 tank maker Rheinmetall both saw their shares fall by around 7%.

Leonardo, an Italian car, and Saab, a Swedish one slid between 4% and 5%.

Indra, a Spanish defence and technology company, also dropped around 4%.

The STOXX 600 index has risen 10% this year on the backs of the prospect that government spending will increase on regional security.

JPMorgan analysts stated in a report earlier this week that the latest peace plan was not acceptable to Ukraine and its European allies. They also viewed the recent sale of defence companies as an "entry point" for the sector.

They wrote: "If the U.S. can impose this plan, which is unlikely in our opinion, we think that it would be a de facto win for Russia. It would drive European defence spending higher than planned, and at a faster pace."

(source: Reuters)