The about-face comes after months of arduous negotiations over Turkey’s demands and on the eve of a critical two-day NATO summit where leaders including US President Joe Biden are eager to show a united front and signal to Vladimir Putin that his war on Ukraine has only strengthened the alliance.

NATO’s northern enlargement heralds one of the most prominent changes in the European security landscape after Russia’s aggression led to shifts including a ramp-up of defense spending in Germany and plans to bring back conscription in France. The early 2022 attack on Ukraine prompted an almost overnight change in public opposition to membership in NATO in Finland and Sweden.

“Completing Sweden’s accession to NATO is a historic step that benefits the security of all NATO allies at this critical time,” Stoltenberg said in Vilnius. “I will not give you the exact dates for that. But this is a clear commitment.”

Eoin Treacy's view

The big question for defense companies is where will the money come from for countries to meet their NATO spending targets? The need is clear, but the route to additional spending runs through national priorities like pensions and social programs.

Companies are unlikely to take commitments at face value until budgets have been approved and longer-term contracts agreed. That suggests less money spent on costly infrastructure building at least until visibility on orders is clear. If correct that implies more money for dividends.
The iShares US Aerospace & Defense ETF is testing the 2020 peak near $120, and a clear downward dynamic will be required to question potential for additional upside.
BAE Systems is showing initial signs of steadying from the region of the trend mean.
Rheinmetall is also steadying in the region of its trend mean.

Italy’s Leonardo has formed an orderly consolidation and is firming from the region of the trend mean.

It is increasingly obvious, Russia’s efforts to capture Bakhmut were a delaying tactic so they could dig in along the southern front. Ukraine’s summer offensive has been focused on probing those lines for weaknesses, while holding the bulk of their force in reserve. They cannot afford to make a wrong move against Russia’s superior numbers. There will be no big push until they are convinced of a high probability of success. If the war turns into a long stand-off that will represent a secular bull trend for munitions and materiel demand.