(AFP/Yonhap)

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South Korea’s defense stocks fell on Tuesday, following reports that Israel and Hezbollah are close to reaching a ceasefire agreement.

Shares of LIG Nex1 were down 8.74 percent at 203,500 won ($145) as of 11:15 a.m., Hyundai Rotem dropped 12.33 percent to 52,600 won, and Hanwha Aerospace declined 10.58 percent to 321,000 won.

The stocks lost ground following news that Israel and Hezbollah are finalizing an agreement for a 60-day ceasefire.

John Kirby, the National Security Council spokesperson, confirmed on Monday that negotiations between the two sides had been “constructive” and “on the right track for a positive outcome.”

Expectations of a policy shift under the upcoming second Trump administration, which could focus on ending the Russia-Ukraine war early, further fueled the downturn in defense-related stocks.

Ukraine reconstruction stocks, in the meantime, surged on speculation that the Trump administration would prioritize rebuilding efforts.

Shares of Daedong soared 12.69 percent to 11,720 won as of 11:18 a.m., with the company reportedly advancing plans to sell tractors and agricultural machinery in Ukraine.

Daedong Metal soared 23.71 percent to 9,080 won, while TYM gained 4.9 percent to 5,140 won.

Meanwhile, electric vehicle (EV) battery stocks gained amid growing concerns in the U.S. over the potential rollback of EV subsidies under the Trump administration.

EcoPro shares climbed 3.93 percent to 82,000 won as of 11:19 a.m., briefly surging as much as 9.89 percent to 86,700 won. Its affiliate EcoPro BM also advanced 1.69 percent to 144,300 won.