Last year, at The Hague, something extraordinary happened — and most American investors slept through it. NATO's 32 member states agreed to spend 5% of their GDP on defense and defense-related security by 2035. That's not 2%. Not 3.5%. Five percent. The largest peacetime military spending commitment in the history of the Western alliance.

Five days from now, those same leaders will gather in Ankara, Turkey, for the first summit since that pledge — and the conversation has shifted from how much to how fast.

Here's what you need to understand. In 2025, European allies and Canada increased defense spending by 20% year-over-year — roughly $139 billion in additional nominal spending in a single year. For the first time in recorded NATO history, all 32 allies exceeded the old 2% threshold. Norway surpassed the United States in defense spending per capita. Europe collectively spent $864 billion on defense last year, making it the primary driver of a global surge that pushed worldwide military expenditure to $2.89 trillion.

Think about that number. $2.89 trillion spent on weapons, soldiers, and military infrastructure in a single year. And the curve is steepening, not flattening.

The European Union's ReArm Europe plan — formally called Readiness 2030 — aims to mobilize €800 billion in additional defense spending by the end of the decade. The mechanics are twofold. First, 17 member states have activated the national escape clause of the EU's fiscal rules, giving them up to 1.5% of GDP in extra borrowing headroom for defense. Second, the EU launched SAFE — Security Action for Europe — a €150 billion loan instrument backed by the EU budget for missile defense, drones, cybersecurity, and critical infrastructure.

Germany is at the center of the transformation. Berlin plans to lift defense spending to nearly 3.5% of GDP by 2029 — up from 2.1% in 2024 — marking the most significant military investment program in post-war German history. By 2029, Berlin aims to spend more than €100 billion annually on defense equipment and maintenance. Goldman Sachs estimates this spending alone could boost German GDP by 0.8%.

So why does this matter to you?

Most investors are still thinking about European defense as a geopolitical headline. It's not. It's a capital allocation story — one of the largest in the world right now. McKinsey calculates that European NATO core defense spending has doubled since 2019 and could reach €800 billion annually by decade's end. Defense investment in EU member states hit a record €106 billion in 2024, up 42% from the prior year. Projections for 2025 show that figure climbing to nearly €130 billion. European defense industry turnover reached €183.4 billion last year, up 13.8%, with 633,000 jobs — an 8.6% increase.

The order books at Rheinmetall, BAE Systems, Leonardo, Thales, and Saab are full. Venture capital is pouring into European defense technology — drones, autonomous systems, electronic warfare. But here's the rub: equipment stocks in European NATO countries remain below 2021 levels, despite all the spending. Why? Military contributions to Ukraine, the retirement of legacy systems, and delivery timelines that stretch four to five years. The industry is running flat out and still falling behind.

If you're looking for the next decade's secular growth story outside of AI, this is it. Europe's rearmament is not a trade. It's a structural shift — driven by the Russia threat, the Iran war's exposure of European dependence on American systems, and a U.S. administration that has made burden-sharing a non-negotiable condition of continued alliance. As Buffett might say: when someone tells you they're going to spend €800 billion, believe them.

I urge you to get positioned before Ankara.

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The United States approved over $1 trillion in defense spending for fiscal year 2026 — a substantial increase from 2025. President Trump's budget proposal calls for $1.5 trillion in 2027. The Pentagon announced framework agreements in March to accelerate production of Precision Strike Missiles, THAAD interceptors, and assorted missile components. Trump posted on social media that American industry had "agreed to quadruple Production of the 'Exquisite Class' Weaponry."

In other words, both sides of the Atlantic are arming up simultaneously. Global military spending hit $2.89 trillion in 2025. The United States, China, and Russia alone accounted for $1.48 trillion — more than half the global total.

And one more thing... the Iran war exposed a vulnerability that most people still haven't grasped. The U.S. expended substantial numbers of expensive precision munitions during the conflict. Europe's reliance on American weapon systems is now under visible strain. Undisclosed U.S.-made weapons heading to Baltic and Scandinavian nations face delays directly caused by stockpile drawdowns. The Prioritised Ukraine Requirements List — NATO's mechanism for allies to fund the supply of U.S.-made systems to Kyiv — is now competing with America's own replenishment needs.

Keep in mind: the U.S. is simultaneously running a $1.9 trillion annual budget deficit with $1.037 trillion in annual interest payments. The arithmetic of spending a trillion on defense and a trillion on interest and running a $1.9 trillion deficit doesn't work forever. Something has to give.

WTI crude fell below $70 a barrel last week for the first time since the Iran war began — its third straight weekly decline. Brent settled near $74. Oil flows through the Strait of Hormuz reached their fastest wartime pace, with confirmed throughput rising to roughly 4.8 million barrels per day. Saudi tankers are heading to the Ras Tanura terminal to restart Persian Gulf exports for the first time since March. Qatar issued its first post-war crude tender.

But the road to normalization is anything but smooth. Iran declared the strait closed on June 21st — then ships kept moving anyway. The U.S. military stated flatly that Iran does not control the waterway. At least 15 Iran-flagged supertankers were outbound with transponders active even as Tehran claimed the corridor was shut. Vice President Vance negotiated a "road map" to a final deal in Switzerland, with both sides agreeing to 60 days of technical talks.

The real question isn't whether oil flows resume. It's who controls Hormuz after the 60-day toll-free window expires. The Islamabad MOU leaves open the possibility that Iran could impose transit tolls — a structural change to global energy logistics that no one is pricing in. Iraq is demanding a higher OPEC production quota. A global supply surplus is building for the second half of 2026. If you're long oil here, you need a thesis beyond "the strait might close again."

Copper hovered below $6.10 per pound this week, down from its January record above $6.30. The pullback is misleading. The structural deficit hasn't gone anywhere.

J.P. Morgan estimates that data center copper demand alone could reach 475,000 tons in 2026 — up from 110,000 tons in 2025. When developers build data centers, they buy copper regardless of price. This is inelastic demand in a market where global visible inventory has risen to 1.5 million tons but mine output growth remains stuck at 1–2% annually. The International Copper Study Group projects the market will enter deficit after two years of surplus.

Chevron's 20-year deal to power Microsoft's $7 billion Texas data center is the template. Every new AI model requires more compute, more electricity, more copper wiring, more rare earth magnets. Global copper demand is forecast to surge from 28 million tons in 2025 to 42 million tons by 2040 — but without meaningful supply expansion, the market faces a 10-million-ton shortfall, according to S&P Global. The defense rearmament story and the AI story converge at the same point: the world needs more copper, more rare earths, more energy — and the supply chains for all three run through geopolitical chokepoints.

In February 2026, a quiet milestone passed that almost nobody noticed. New START — the last remaining nuclear arms control treaty between the United States and Russia — entered its final stretch with no successor agreement in sight. The treaty, which caps deployed strategic nuclear warheads at 1,550 per side, has been effectively frozen since Russia suspended its participation in 2023. When it expires, there will be no legally binding restrictions on the world's two largest nuclear arsenals for the first time since 1972.

Here's the idea. The United States and Russia currently hold 87% of the world's nuclear weapons. The Federation of American Scientists projects that following New START's expiration, deployed warheads between the two countries could top 6,000 within a decade. China is on track to field 1,500 warheads by 2035. Every prior treaty framework — Open Skies, the Intermediate-Range Nuclear Forces Treaty, the Anti-Ballistic Missile Treaty — has already ceased to exist. Only the Non-Proliferation Treaty remains, and it imposes no hard caps on recognized nuclear states.

Think about what that means in context. Europe is rearming at a pace not seen since the Cold War. The U.S. just fought a war with Iran that included strikes on nuclear facilities. China's military budget continues to climb. And the institutional architecture that prevented nuclear escalation for half a century is dissolving.

The Ankara summit next week will address defense spending and Ukraine. It will discuss deterrence and industrial capacity. What it will almost certainly not do is propose a new framework for nuclear arms control. That silence is the most important story nobody is covering.

So what should you do? First, understand that the defense spending cycle is not a temporary response to Ukraine — it's a generational reallocation driven by the collapse of the post–Cold War security order. Second, recognize that gold's strategic role extends beyond inflation hedging — it's the ultimate hedge against geopolitical entropy. Gold at $4,050 is not expensive if the world is entering an era of permanent rearmament. Third, diversify across the defense supply chain: not just the primes, but the miners, the processors, the rare earth refiners, and the energy infrastructure companies that power all of it.

Horse, meet water.

Five days away. Leaders will review progress on the 5% GDP commitment, discuss Ukraine support mechanisms, and address Hormuz and Middle East security. If you own European defense stocks, this is your catalyst event. If you don't, ask yourself why.

The Islamabad MOU gave Washington and Tehran until mid-August to finalize a permanent deal covering nuclear inspections, frozen assets, and Hormuz governance. Every headline between now and then will move oil. The Treasury's temporary sanctions waiver on Iranian oil expires in August — if it lapses, commercial operators face renewed legal exposure.

The November midterms are now four months away. Trump's gamble on tariffs, Iran, and defense spending will be tested at the ballot box. A shift to divided government would reduce the threat to Fed independence but could freeze further fiscal stimulus. Markets will begin pricing this in.

The sweeping October 2025 export controls requiring licenses for any product containing Chinese-origin rare earths remain suspended until November. Defense supply chains and EV manufacturers are operating on borrowed time. If the suspension expires without renewal, the disruption will be immediate and severe.

European defense companies have backlogs stretching four to five years. The gap between commitments and actual delivery is widening. Investors are now scrutinizing which companies can convert orders into revenue and margins. The "price discovery moment" — as one analyst put it — is happening right now.