If the US were to leave NATO, it would mean one of the biggest geopolitical changes in modern times. NATO has been the cornerstone of European security since 1949, with the US by far the strongest military actor. A US withdrawal would therefore force European countries to quickly reconsider both their defence policy and their energy strategy (which they are discussing in EC in todays situation).
Two sectors that would likely be most affected are the defence industry and the energy sector.
The most obvious winner would be Europe’s defence industry. Today, many European countries depend on the US military capabilities and nuclear umbrella. If that security guarantee disappears, the pressure to build up their own military resources would increase sharply. This would likely lead to significantly higher defence budgets across Europe.
Companies such as Rheinmetall, BAE Systems, Saab and Thales could see a sharp increase in demand for everything from combat vehicles and ammunition to radar systems, air defence and advanced electronics. Europe’s military build-up would likely be a long-term trend rather than a temporary increase. I own Saab via Investor AB and happy to add more. Also, Flat capital is major holder of Defensor AB.
At the same time, energy security would become an even more important strategic issue. Europe’s experience after Russia’s invasion of Ukraine showed how vulnerable the continent can be when energy supplies depend on geopolitics. If NATO weakens, many European governments may want to further reduce their dependence on external energy sources. This could benefit companies in both energy production and energy infrastructure. Companies such as Equinor and Shell can benefit from increased investments in European gas production and LNG infrastructure. At the same time, companies in renewable energy, can benefit from investments in energy independence. Here, I own shares in ÅkerBP and ETF:s with exposer to energy sector.
In conclusion, a US withdrawal from NATO (which might happen) would create great uncertainty, but also clear economic shifts. The defense industry and the energy sector would likely become two of the most strategically important – and potentially fastest growing – parts of Europe’s economy in a new geopolitical reality.
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