An IMGW News Report
European defence shares soared on Monday, as investors bet on a surge in military spending following an ill-fated meeting between Donald Trump and Volodymyr Zelensky.
The STOXX Europe Aerospace & Defence index climbed 7.9% by early afternoon, heading for its biggest one-day rise in five years. Year-to-date, the index has gained more than 30%, reflecting growing concern that Europe can no longer rely on the United States as its security guarantor.
“In 2024, EU countries spent 1.9% of GDP on defence, but calls for a rise to at least 3% are growing.”
Friday’s meeting at the White House underscored this shift. Zelensky, seeking firm US security commitments in any Ukraine-Russia settlement, was rebuffed by Trump. The exchange further fuelled fears that Washington may disengage from European security, prompting investors to anticipate a ramp-up in EU military budgets.
Defence stocks surged in response. Germany’s Rheinmetall rose 12.9%, while BAE Systems and Leonardo gained 14.3% and 12.1%, respectively.
A Push to Re-arm
European leaders gathered in London over the weekend to discuss military spending. Ursula von der Leyen, president of the European Commission, called for an urgent ramp-up in defence investment. “After years of under-investment, it is now of utmost importance to strengthen Europe’s defence,” she said.
EU leaders are set to meet later this week to discuss Ukraine and the bloc’s military commitments. In 2024, EU countries spent 1.9% of GDP on defence, but calls for a rise to at least 3% are growing. French President Emmanuel Macron and NATO’s secretary-general have both advocated for higher spending.
Holger Schmieding, chief economist at Berenberg, noted that European NATO members “can still hope” for US support in a future conflict but can no longer be “100% sure.” Transatlantic trust has been “damaged,” he wrote, predicting a rise in defence budgets across Europe.
