Catenaa, Saturday, November 14, 2026- Global military spending hit a record $2.9 trillion in 2025 as NATO members accelerated rearmament, with Europe sitting at the center of the defense rebuild.
Morgan Stanley said NATO’s European members and Canada raised spending 20% in a single year, its highest growth since 1953.
Poland has emerged as a major contributor to Europe’s defence expansion, allocating 4.5% of its GDP to military expenditure in 2025. Its arms imports increased ninefold between 2016–2020 and 2021–2025, illustrating the country’s growing dependence on international weapons suppliers, according to Morgan Stanley.
“We believe that creates an investment theme beyond the traditional US defense complex,” Morgan Stanley said.
Morgan Stanley expects Europe’s rearmament programme to create opportunities for weapons manufacturers in emerging economies. The firm believes suppliers with competitive prices and shorter delivery schedules could secure a greater share of international defence contracts.
The report said that the ongoing war in Ukraine and the uncertainty surrounding future US defence commitments have changed Europe’s strategic thinking over domestic military capabilities.
Europe’s military spending rose 14% in 2025. France alone has more than 180 combat aircraft on order, almost all of them Dassault Rafale fighter jets, Morgan Stanley said.
At the 2025 Hague summit, NATO members committed to spending 5% of GDP on defense and related security requirements by 2035.
Morgan Stanley said South Korea is a potential beneficiary of rising global military expenditure, as the country’s established defense manufacturing capabilities respond to continuous threats from North Korea.
Morgan Stanley said Poland has emerged as an anchor customer, accounting for about 46% of South Korea’s defense exports in 2025.
According to Morgan Stanley, total exports increased from roughly $7.3 billion in 2021 to $15.4 billion in 2025, reflecting South Korea’s ability to convert manufacturing capacity into large, multi-platform export contracts.
Moreover, the Morgan Stanley report said drones have lowered the cost of combat, even as the core force structure remains conventional.
“Cheap, expendable systems can now provide surveillance, precision strikes, electronic warfare and long-range attacks,” the report said, as Drones are relatively easy to mass-produce and have become ubiquitous in recent conflicts in Armenia, Ukraine and the Middle East.
“Ukraine is now a leader in first-person-view (FPV) drones, rapidly increasing its monthly unit production capacity from 20,000 in 2024 to 200,000 in 2025, having planned to triple it to 600,000 in 2026,” the report said.
Morgan Stanley said that the US National Defense Authorization Act has earmarked about $1.7 billion for small unmanned aerial systems, more than quadruple what it spent in 2022, but still well under one percent of the overall defense budget.
US Foreign Military Sales approvals to the Middle East topped $45 billion in Q1 2026 alone, more than the global drone market generates in a full year, according to Morgan Stanley.
