Yikes! The US gets involved and previously sanguine investors panic. A three-line statement from BAE Systems announcing a formal Department of Justice investigation into its dealings with Saudi Arabia prompted Tuesday’s 8 per cent share price rout.

Why are investors so nervous? Last week, the US and UK governments signed a treaty promising to open up competition for US defence work and allow the necessary transfer of technology to the UK. BAE is the only company with a strong position in both markets — 45 per cent of its sales are to the US and it is the sixth largest Pentagon contractor. That suggests the US government was comfortable with BAE when it signed last week’s agreement. Nor should BAE’s recent $4.1bn acquisition of Armor Holdings be in doubt. The Department of Justice is represented on the Committee on Foreign Investment in the United States (Cfius), which has already approved the deal from a national security standpoint. The only remaining hurdles are an antitrust review and an Armor shareholder vote, neither of which looks problematic.