Geopolitics is no longer a background risk it’s the primary growth driver for global defence

Rising geopolitical tensions across Eastern Europe, the Middle East, and the Indo-Pacific are reshaping defence priorities, budgets, and capital allocation. Defence spending is no longer cyclical; it has become structural. In 2025, global military expenditure exceeded US $2.4 T, with NATO members accelerating commitments toward and beyond the 2% of GDP defence benchmark.

The U.S. defence budget alone crossed US $880 B, reflecting sustained demand for advanced capabilities rather than short-term conflict response. This shift is driving a multi-year expansion across aerospace and defence value chains. What’s driving the sector? Modern warfare is technology-led.

Governments are prioritizing missile defence, precision munitions, space-based surveillance, cyber defence, autonomous systems, and AI-enabled command infrastructure. Supply-chain resilience and domestic manufacturing mandates are reshaping procurement strategies, favoring scale, integration, and local capacity.

The U.S. defence sector is entering a prolonged growth phase underpinned by record-level federal defence budgets and sustained investment momentum. The Pentagon’s total defence budget request for FY 2026 was approximately US $961.6 B, including discretionary funding and US $113.3 B in mandatory/reconciliation funds.

For fiscal year 2025, the Department of defence base budget stood at approximately US $849.8 B, up nearly 1% from FY2024 levels, with US $167.5 B allocated to procurement and US $143.2 B to research, development, test and evaluation signaling continued modernization focus. As geopolitical uncertainty becomes persistent rather than episodic, the defence sector stands out as one of the most visible, policy-backed, and durable growth themes heading into 2026.