Europe Backfills US NATO Cuts, Defense Stocks in Focus

“In the air and maritime domain, Europeans can and have stepped up” and even gone beyond 100%, said Colonel Martin L. O’Donnell, spokesperson at NATO’s military command. In certain cases, European allies have the same kit or better equipment than the US inventory, he added, citing the example of a type of F-16 fighter jet to be received by Bulgaria.

Stringer was appointed as NATO’s second in command of operations in Europe this year as the alliance grapples with the war in Ukraine on its borders and an increasingly isolationist US.

Asked about the recent resignation of British Defense Secretary John Healey over what he said was inadequate spending by the UK, Stringer said that all “the nations, all 32 agreed that they would get to 3.5% by 2035 and have a credible path to get there.”

“Nobody gets an opt out on that one,” he said, referring to NATO’s target for governments to spend at least 3.5% of gross domestic product on core defense. “That’s what we agreed and that obviously includes the UK.”

Areas of investment announced by the UK in recent weeks are “absolutely aligned with where NATO sees our forces needing to go to be able to be credible in deterring and defending the billion people under the NATO umbrella,” he said.

“NATO will expect all nations, including the UK, to live by their commitments,” he added.

For investors, the backfill signals sustained demand for European defense equipment. Companies like BAE Systems, Rheinmetall, and Thales have already seen order books swell as governments boost budgets. The Ankara summit next week will test whether the 3.5% GDP target holds and whether the US review leads to further cuts. Any concrete commitment from a major ally could push defense stocks higher, while a failure to agree on burden-sharing would raise questions about NATO’s long-term cohesion.

The summit runs through Thursday. No date has been set for the US review’s conclusion.