In 1982, during the Falklands War, the Exocet became noted worldwide when Argentine Navy Dassault-Breguet Super Étendard warplanes carrying the AM39 Air Launched version of the Exocet caused irreparable damage which sank the Royal Navy destroyer HMS Sheffield on 4 May 1982. Two Exocets then struck the 15,000 ton merchant ship Atlantic Conveyor on 25 May. Two MM38 ship-to-ship Exocet missiles were removed from the old destroyer ARA Seguí, a retired US Navy Allen M. Sumner-class vessel and transferred to an improvised launcher for land use, a technically challenging task which also required reprogramming. One of these was fired at, and caused damage to, the destroyer HMS Glamorgan on 12 June.
The Exocet that struck the Sheffield impacted on the starboard side at deck level 2, travelling through the junior ratings scullery and breaching the Forward Auxiliary Machinery Room/Forward Engine Room bulkhead 2.4 metres (7 ft 10 in) above the waterline, creating a hole in the hull roughly 1.2 by 3 metres (3.9 by 9.8 ft). It appears that the warhead did not explode. Accounts suggest that the initial impact of the missile disabled the ship's electrical distribution systems and breached the pressurised sea water fire main, severely hampering any firefighting response and eventually dooming the ship to be consumed by the fire. The loss of Sheffield was a deep shock to the British public and government.
Some of the crew of Sheffield were of the opinion that the missile exploded, others held the view that it had not. The official Royal Navy Board of Inquiry Report, however, stated that evidence indicates that the warhead did not detonate. During the four and a half days that the ship remained afloat, five salvage inspections were made and a number of photographs were taken. Members of the crew were interviewed, and testimony was given by Exocet specialists (the Royal Navy had 15 surface combat ships armed with Exocets in the Falklands War). There was no evidence of an explosion, although burning propellant from the rocket motor had caused a number of fires, which could not be checked as a fire main had been put out of action.
The Atlantic Conveyor was a container ship that had been hastily converted to an aircraft transport and was carrying helicopters and supplies. The missiles had been fired at a frigate but had been confused by the frigate's defences and instead targeted the Atlantic Conveyor nearby. The Exocets - it is not certain whether the warheads exploded or not - caused a fire in the fuel and ammunition aboard which burnt the ship out. Atlantic Conveyor sank while under tow three days later.
The Exocet that struck Glamorgan detonated, (a number of crew members witnessed this, as did the Argentines who fired it, the whole event being recorded by a film crew), on the port side of the hangar deck, punching a hole in the deck and galley below, causing fires. The missile body traveled into the hangar and caused a fully fueled and armed Wessex helicopter to explode. Prompt action by the officers and men at the helm saved the ship. With less than a minute's warning the incoming missile had been tracked on radar in the operations room and bridge; as the ship was traveling at speed, a turn was ordered to present her stern to the missile. The ship was heeled far over to starboard when the missile struck. It hit the coaming and was deflected upwards. The dent caused by the impact was clearly visible when Glamorgan was refitted in late 1982.
In the years after the Falklands War, it was revealed that the British government and the Secret Intelligence Service had been extremely concerned at the time by the perceived inadequacy of the Royal Navy's anti-missile defences against the Exocet and its potential to tip the naval war decisively in favour of the Argentine forces. A scenario was envisioned in which one or both of the force's two aircraft carriers (Invincible and Hermes) were destroyed or incapacitated by Exocet attacks, which would make recapturing the Falklands much more difficult.
Actions were taken to contain the Exocet threat. During the preparation for the war, Britain benefited from the help of France, which gave the Exocet's code and homing radar. A major intelligence operation was also initiated to prevent the Argentine Navy from acquiring more of the weapons on the international market. The operation included British intelligence agents claiming to be arms dealers able to supply large numbers of Exocets to Argentina, who diverted Argentina from pursuing sources which could genuinely supply a few missiles. France denied deliveries of Exocet AM39s purchased by Peru to avoid the possibility of Peru giving them to Argentina, because they knew that payment would be made with a Credit card from the Central Bank of Peru. British intelligence had detected the guarantee was a deposit of two hundred million dollars from the Andean Lima Bank, an owned subsidiary of the Banco Ambrosiano.
In about 1983, the Lokata Company (a maker of boat navigation equipment), independently duplicated part of the Exocet's navigation system; it caused official complications.
During the Iran-Iraq War, on 17 May 1987, an Iraqi jet aircraft fired Exocet missiles at the American frigate USS Stark. Thirty-seven United States Navy personnel were killed and twenty-one others were wounded.