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Britain’s biggest defence companies received a £4bn boost after Sir Keir Starmer said he was “ready and willing” to deploy peacekeeping troops in Ukraine.
BAE Systems was the biggest riser on the FTSE 100 after shares rose by 6pc, the biggest surge in 18 months, adding £2bn to its market cap to give it a value of almost £40bn.
Rolls-Royce, another significant UK military contractor, was also in high demand from traders, with shares up by as much as 1.5pc.
The rally in UK defence stocks was prompted by fears over the developing stand-off in Ukraine after Donald Trump, the US president, said he would cut out Europe to strike a peace deal with Russia.
Writing in The Telegraph on Monday, the Prime Minister said he would not take the decision of putting British servicemen and women in harm’s way “lightly” but there was a chance British troops would have to be used.
The move comes ahead of crunch talks in Paris on Monday in an emergency summit hosted by Emmanuel Macron, the French president.
The leaders of France, Germany, Italy, Poland, Spain, the Netherlands, Denmark, the European Commission, the European Council and Nato will meet to decide how to react to Mr Trump’s peace plan.
Marco Rubio, the US secretary of state, arrived in Saudi Arabia on Monday ahead of anticipated talks with Russia on how to end its three-year war with Ukraine.
Mr Trump’s plan for peace talks with Vladimir Putin has sent shock waves through Europe and forced the UK and Nato to consider alternatives if the US pulls its support for Ukraine.
At the Munich Security Conference, Volodymyr Zelensky, the Ukrainian president, said Europe should create its own army because of the US pulling back from military engagements in Europe.
BAE Systems, which is due to update investors on its annual result Wednesday, is one of the world’s top 10 arms manufacturers and the largest in Europe.
It has already had a significant role in Ukraine, working with Nato to provide support, training and repairs to the Ukrainian armed forces.
In November, BAE said it would open a £25m artillery factory in Sheffield, making M777 towed howitzers which are reportedly favoured by Ukrainian soldiers fighting the Russian military because of their reliability and the ease at which they can be moved.
BAE is responsible for building or maintaining programmes for the F35 fighter aircraft and the Typhoon aircraft, as well as the Dreadnought submarine.
Shares in QinetiQ Group, another defence contractor, also rose 3pc to around £3.80 on Monday. UK-based military sensors manufacturer Senior was also up 2.4pc to 168p.