European defense stocks slide as U.S., Ukraine make progress on peace plan

European defense stocks fell on Monday, extending declines as Ukraine and the U.S. made progress on peace proposals over the weekend.

The Stoxx Europe Aerospace and Defense index was 1.2% lower during morning deals, extending losses after falling more than 3.4% on Friday.

Germany's Rheinmetall, Hensoldt and Renk were all off around 4% at around 9:05 a.m. London time (4:05 a.m. ET), slipping toward the bottom of the pan-European Stoxx 600 index. Sweden's Saab fell nearly 3%.

Europe's benchmark natural gas prices, meanwhile, fell below 30 euros ($34.59) per megawatt hour on Friday morning, notching an 18-month low, according to LSEG data.

It comes after the U.S. said Sunday that there had been progress in peace talks at the weekend, which were attended by U.S. Secretary of State Marco Rubio, but that no agreement was reached on security guarantees for Ukraine.

The U.S. and Ukraine agreed that the consultations were "highly productive," the countries said in a joint statement released on Sunday.

The European Union, for its part, has laid out its own objectives in ensuring sustainable peace in Ukraine. The European Commission, the European Union's executive arm, said on Sunday that key conditions include no forced border changes and no limitations on Kyiv's armed forces.

These elements appear to challenge some of the proposals put forward under a widely leaked U.S. plan for peace. Washington had reportedly proposed that Ukraine cede land including Crimea, Luhansk and Donetsk, and pledge never to join the NATO military alliance.

The plan also purportedly said Kyiv would receive "reliable" security guarantees, while the size of the Ukrainian Armed Forces would be limited to 600,000 personnel, according to The Associated Press, which obtained a copy of the draft proposal.

Analysts were doubtful that the U.S. plan, which is thought to be favorable toward Russia, would be backed by Ukraine.

Ben Gutteridge, market insights strategist at Invesco, said it was a "perfectly reasonable" view to expect that Russia may become yet more confident in its geopolitical strategy over the medium term.

"I think … I would share that the structural story for buying defense stocks, sort of, still seems in place to me. The spheres of influence are looking ever more tense and, therefore, defensive stocks have a structural position in portfolios," Gutteridge told CNBC's "Squawk Box Europe" on Monday.

"The geopolitical outlook, in the short term, looks a little more encouraging but for medium and long term, it still looks precarious," he added.