The Inflection Point In European Defense Is Here

UBS' latest European Economic Perspectives note to clients highlights the current and future state of defense spending by European nations. Much like AI stocks are driving U.S. markets, defense names are heating up across Europe over increased spending trends and targets.

According to UBS analysts, led by Anna Titareva, the European defense sector is at a critical inflection point. Russia's invasion of Ukraine prompted the bloc to reverse a long-standing decline in military spending. EU defense spending is estimated at €326 billion in 2024—roughly 1.9% of GDP—a sharp increase in recent years, yet still falling just short of NATO's 2% guideline. Excluding non-NATO EU members, most countries barely meet the threshold at 2.2%.