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Defence Stocks Soar: Geopolitical Fears Fuel Investor Bets
29 Nov, 2025
Summary
- Nato defence spending to rise significantly by 2035.
- Rolls-Royce shares climbed 1050% over three years.
- Babcock's shares up 124% this year amid global defence budget increases.
Heightened global geopolitical instability, including conflicts in Ukraine and the Middle East, is spurring a significant increase in defence spending. Nato countries are moving towards their commitment of allocating 5% of GDP to defence by 2035, with military expenditure already at $2.7 trillion in 2024. This shift is making defence stocks an attractive investment, seen as an ethical choice by many investors.
Companies like Rolls-Royce have seen extraordinary growth, with its shares jumping 1050% in three years. The company aims to become the largest FTSE 100 business, partly by leveraging AI and building small nuclear reactors for data centres, alongside its traditional engine maintenance for civil and defence customers.
Babcock and BAE Systems are also experiencing strong investor interest, with Babcock's shares up 124% this year and BAE Systems' shares showing a 43% increase year-to-date. Analysts largely recommend these stocks as 'buy', anticipating continued growth fueled by sustained global defence budget increases and technological advancements in the sector.
