Russia Threatens The Baltics. The Pentagon Pulls Back From NATO. Defense Stocks Keep Catching A Bid.
Two related stories anchored today's front page. The first, Yaroslav Trofimov reporting from Tallinn: Russia is making "increasingly bellicose statements" against the Baltic states and several European national-security officials warn that Vladimir Putin could test NATO cohesion by targeting Latvia, Lithuania, Sweden / Denmark islands in the Baltic Sea, or alliance territory in the Arctic.
Specific incidents: Russia has threatened to bomb "decision-making centers" in Latvia after accusing the country of hosting Ukrainian drone operators (which Latvia denied). Air-raid alarms sounded in Lithuania last week, forcing the government into a bunker after suspected Russian drones approached its airspace. The Russian Ministry of Defense published the addresses of companies in eight European nations allegedly working on drone production with Ukraine, threatening "unpredictable consequences."
The U.S. Backstop Is Shrinking
The second story, by Michael Gordon and Robbie Gramer: the Pentagon is scaling back the forces it plans to send to Europe in a crisis. This is a fresh step in the broader Trump-administration shrinking of U.S. NATO commitments. The combination — greater perceived threat from the East, less U.S. backstop — pushes every European NATO member toward higher defense spending and accelerated procurement.
This isn't speculation. Germany has already committed to 3.5% of GDP defense spending. The UK is at 2.7%. Poland is over 4%. France is rebuilding its munitions stockpiles. The Baltic states have aggregate defense spending now above 3%. Every one of these governments is signing procurement contracts that extend past 2030.
The U.S. Defense Sleeve
Lockheed Martin (LMT) — F-35 backlog through 2032. Every Baltic / Nordic / Polish acquisition cycle pulls in F-35 orders. PAC-3 missile defense orders are running at record levels.
RTX Corp (RTX) — air defense, Patriot, AMRAAM. Patriot battery deliveries are scheduled into 2031. AMRAAM and Stinger production lines are being expanded.
General Dynamics (GD) — combat vehicles, submarines. Stryker and Abrams orders for European customers. Virginia-class submarine cadence ramping.
Northrop Grumman (NOC) — B-21, ICBM, space. The B-21 program is on schedule. Sentinel ICBM continues. Space-based missile-warning constellations are accelerating.
L3Harris (LHX) — communications, electronic warfare. EW spend is one of the fastest-growing line items in every NATO budget. LHX is well-positioned.
The European Defense Sleeve
Two non-U.S. defense names that benefit from the U.S. pullback are worth flagging:
Rheinmetall (RHM.DE / RNMBY) — German army contractor, 155mm shell production lead. The order book has roughly doubled in 18 months.
BAE Systems (BAESY) — UK / U.S. cross-Atlantic defense, submarine systems, Eurofighter Typhoon work. Stable dividend.
The Risk Footnote
The big risk to the defense trade is a sudden Russia / Ukraine cease-fire. We've held the position through every premature peace headline for two years; the order books are now multi-year and contracted, so even an actual cease-fire (which we're not expecting before late 2026) would not zero out the backlog. The capex cycle in European defense is now structural.
The second risk is a sudden U.S. budget cut. Possible but unlikely given the Pentagon's posture and the bipartisan support for defense procurement. Even in a budget-cut scenario, the international foreign-military-sales pipeline cushions U.S. defense names.