Paris, May 14, 2025 — Shares of French aerospace giant Dassault Aviation SA (EPA: AM) dropped sharply this week, falling 7.89% over the past five days to €301.00, following unconfirmed reports that three Indian Air Force Rafale jets were shot down by Pakistan during a recent escalation of tensions. The decline, which erased nearly 10% of the company’s market capitalization, reflects investor concerns over the Rafale’s battlefield performance and potential implications for future contracts.

The controversy stems from Pakistan’s claim that its Chinese-made Chengdu J-10C jets, armed with PL-15 beyond-visual-range missiles, downed the Rafales during India’s Operation Sindoor on May 7, 2025. The operation, a retaliatory strike targeting terrorist infrastructure in Pakistan and Pakistan-occupied Kashmir, followed a deadly terror attack in Pahalgam on April 22. Pakistani officials, including Defense Minister Khawaja Asif, alleged that five Indian aircraft, including three Rafales, a MiG-29, and a Su-30, were shot down in self-defense. Pakistan released images of wreckage, including a Rafale tail marked “BS 001,” but discrepancies in the imagery have fueled skepticism.

India has neither confirmed nor denied the losses, with Air Marshal A.K. Bharti stating on May 11, “Losses are part of combat, but all our pilots are back home.” The lack of clarity has intensified market uncertainty, with Dassault’s stock hitting an intraday low of €291.20 on May 12 before closing at €299.80. Analysts suggest the sell-off is driven by short-term fears over the Rafale’s reputation, despite Dassault’s robust €43.22 billion order book, bolstered by India’s recent €7.4 billion contract for 26 Rafale-M naval jets.

Meanwhile, shares of China’s Chengdu Aircraft Corporation (CAC), manufacturer of the J-10C, surged 20% to 95.86 yuan on May 12, reflecting investor confidence in the jet’s perceived edge in the clash. The incident has sparked global interest, with some analysts questioning whether the Rafale’s 4.5-generation capabilities were outmatched by the J-10C’s advanced missiles and radar.

Despite the downturn, some market experts remain optimistic about Dassault’s long-term prospects. “The Rafale remains a cornerstone of India’s air force, and the recent dip is likely an overreaction to unverified claims,” said Avinash Gorakshkar, Head of Research at Profitmart Securities. He noted the stock’s immediate support at €290, with potential for a rebound to €375 if sentiment stabilizes.

The India-Pakistan ceasefire on May 10 has eased immediate tensions, but the episode underscores the volatility of defense stocks tied to geopolitical events. Investors are advised to monitor upcoming earnings on May 28 and the ex-dividend date of May 20 for further signals. As the fog of war clears, the true impact on Dassault’s market position and the Rafale’s reputation remains uncertain.