The next scene takes place in London, where Wulfgar blows up a department store. Meanwhile, back in New York City, DaSilva and Fox go on a drug bust. Back in London again, Wulfgar meets an associate at a party, Kenneth, who tells Wulfgar that Mercer, who we never see but come to know as the financier of Wulfgar's operations, is withholding money owed to Wulfgar because several children were killed in Wulfgar's latest bombing. Wulfgar quickly finds out that Kenneth has tipped off the police and kills him and the policemen are coming to get him. He then flees to Paris where he meets his associate Shakka Holland (Persis Khambatta) at La Sainte-Chapelle. Shakka remarks that La Sainte-Chapelle is a bad meeting place because it's next to (in real life too), the Palais de Justice, a courthouse in Paris. Shakka informs Wulfgar that Kenneth had a photo of Wulfgar on him when he was killed so Wulfgar and Shakka go to see a plastic surgeon. We find out later they killed the surgeon after the surgery. Wulfgar then flees to New York.
British Counter-terrorist specialist Peter Hartman (Nigel Davenport) comes to America to assemble a task force called A.T.A.C. (Anti-terrorist Action Comand) to stop Wulfgar. Hartman believes Wulfgar will come to the U.S. next primarily for the press coverage. Hartman schools DaSilva, Fox and a specially selected team of New York police on Wulfgar, Shakka, and terrorism in general.
Wulfgar meets a woman, Pam, in a nightclub and moves in with her. Surprisingly enough, when she asks him what he does for a living, he tells her the complete and total truth: "I'm an international terrorist wanted on three continents." She thinks he's just kidding. Alone in her apartment while Wulfgar (known as Eric to Pam), is away, Pam discovers Wulfgar's arsenal of weapons in a case just as Wulfgar unexpectedly comes home. Pam, who has a stereo blaring, doesn't hear him and is caught holding a grenade from his suitcase. Wulfgar kills Pam but her death is the first break Hartman, DaSilva, and Fox get. Wulfgar has left behind a map with his last bombing circled. DaSilva and Fox find out some of Pam's favorite nightspots and hope to find Wulfgar at one of them. They do. But, unsure of what he looks like since the plastic surgery, they hesitate and after a long chase, Wulfgar gets away. Wulfgar is now hiding and living down in the basement of a little grocery store and after the chase, we learn Shakka is now in the United States and is there to meet him.
A few days later the team is protecting an important United Nations function that has the earmarks of a potential terrorist target. Just when everything seems to be running smoothly we see that Shakka is there, she has somehow eluded security, and with no one else around, she shoots Hartman.
Wulfgar and Shakka's next act is to hijack the Roosevelt Island Tram carrying U.N. representatives. Because he now knows DaSilva as a result of the nightclub chase he executes the wife of the French ambassador while DaSilva is watching from a hovering police helicopter. Wulfgar decides to let a baby onboard go and demands that DaSilva personally board the tramway to rescue it. DaSilva is winched up to the aerial tram and confronts Wulfgar face-to-face. DaSilva demands to know why Wulfgar killed the woman. “I wanted to.” the sadist replies. DaSilva and the baby are lowered back down to a waiting barge.
The police agree to Wulfgar's demands for a bus to escort him to safety. Wulfgar and Shakka hide among the crowd of hostages from the tram. DaSilva waits until they try to board before making his move. He plays back a recording of Hartman's lecture in which the terrorist expert denounces Shakka. In a rage, Shakka breaks from the hostages and is gunned down by Fox. Wulfgar somehow escapes, driving the bus off a ramp into the East River.
A search of the wreckage shows no sign of Wulfgar. The team finds the store where Wulfgar has been staying and DaSilva finds that Wulfgar has a lot of information on DaSilva, including an address of his ex-wife, Irene (Lindsay Wagner). Wulfgar makes his way to Irene's house, hides outside, and sees Irene walk up to the house and go in. He breaks in, finds her washing dishes and sneaks up behind her brandishing a knife. But DaSilva has made it to Irene's first, he turns around, wearing his ex-wife's housecoat and a blonde wig, brandishing a gun. With nowhere to go, Wulfgar lunges at DaSilva who fires his revolver twice into the terrorist, blowing him into the street.
The film marked the American debut of Dutch actor Rutger Hauer. According to a recent interview in Premiere, Hauer was told before filming that Stallone ran up building stairwells for exercise. However, during the subway chase, Hauer continually outran the American star, who is known for his competitive streak (see also Victory). Stallone also gave the producers headaches by insisting on doing his own stunts. According to actor Nigel Davenport in an interview for the BBC's Wogan show, Stallone performed the scene where he was winched up to the tram without a double. The film's stunt coordinator was the legendary Dar Robinson. Stallone confirms this in a Q&A session on Ain't It Cool News' website:
Hanging from the cable car was probably one of the more dangerous stunts I was asked to perform because it was untested and I was asked to hold a folding Gerber knife in my left hand so if the cable were to snap, and I survived the 230 foot fall into the East River with its ice cold 8 mile an hour current, I could cut myself free from the harness because the cable when stretched out weighed more than 300 lbs. I tell you this because it's so stupid to believe that I would survive hitting the water so to go beyond that is absurd.
In the same Q&A session, he said that Nighthawks "was even a better film before the studio lost faith in it and cut it to pieces. What was in the missing scenes was extraordinary acting by Rutger Hauer, Lindsey Wagner, and the finale was a blood fest that rivaled the finale of Taxi Driver. But it was a blood fest with a purpose".
The subway train used in the chase sequence consisted of retired IND equipment that had been preserved as a museum train. Of the cars whose numbers are visible, 800 is now at the Seashore Trolley Museum in Kennebunkport, ME. 1802, the last prewar NYC subway car built, is owned by Railway Preservation Corporation and remains in New York, where it operates several times a year on museum fantrips along with other preserved cars. 1208 has since been scrapped. The IND Hoyt-Schermerhorn station in Brooklyn served as both the 57th and 42nd St. stations (a Hoyt-Schermerhorn sign is briefly visible when Stallone tries to pry the doors open as the train is pulling out). The train operated on the unused outer track that leads from the Court St. station, now the New York Transit Museum.
Stallone says of the film now, "At the time, people couldn't relate to it, and the studio (Universal) didn't believe in it".
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