EU defense stocks climb as NATO chief says contractors struggling to keep pace By Investing.com

Investing.com — European defense stocks rose sharply Monday, with gains ranging from 1% to nearly 12%, after NATO Secretary-General Mark Rutte said weapons contractors are struggling to keep pace with a surge in allied military spending ahead of this week’s NATO summit in Ankara, Turkey.

Italy’s led gains, climbing 12.84% to €12.30 as of 04:30 ET (08:30 GMT). Other defense stocks also advanced, with , , , , , , and posting gains.

Rutte, in remarks to The Wall Street Journal ahead of the summit, said the alliance has moved from pledges to execution. “A year ago was all about promises” of additional spending, Rutte said. This year, “it’s about delivery,” he said.

Non-U.S. NATO members increased military spending 20% last year over 2024 levels, to $574 billion, according to NATO. German defense outlays rose 24% to $114 billion, according to the Stockholm International Peace Research Institute, with Berlin targeting roughly $180 billion by 2029.

Rutte said the pace of spending is testing contractors’ capacity to deliver, with around $300 billion in weapons already ordered from U.S. companies. “We are basically reaching the absorption-capacity level,” he said, citing constrained industrial capacity and limited ability to recruit and train soldiers as the two main bottlenecks.

U.S. Ambassador to NATO Matthew Whitaker called for consolidation among European defense companies, saying spending increases must translate into equipment rather than inflation.

TD Cowen in a recent note said NATO leaders meeting in Ankara this week will focus on defense spending, industrial capacity and support for Ukraine, with President Trump attending to press allies on burden-sharing and implementation of NATO’s 5% defense spending commitment.

The broker said alliance officials have signaled new defense investment announcements and contract activity tied to the summit, which it said could be positive for U.S. foreign military sales, already running at a historic pace.

TD Cowen also said it views drones and counter-drone systems as the most compelling area of incremental defense spending, citing a structural shift in how wars are fought and how critical infrastructure is defended.

The NATO summit runs July 7-8 in Ankara. A separate defense industry forum is being held alongside the leaders’ meetings, where NATO officials expect to announce contracts, preliminary deals and joint-production agreements.