Share prices of European weapons companies surged on Monday as investors expected a significant increase in spending following the UK and France’s efforts to broker a peace deal for Ukraine.

BAE Systems in Britain saw a rise of up to 17% on Monday morning, while Germany’s Rheinmetall gained 14%, France’s Thales increased 16%, and Italy’s Leonardo was up 10% in early trading.

This rally in defense company shares reflects investor expectations of European countries increasing their defense budgets amid concerns that US President Donald Trump might withdraw security guarantees.

Trump’s statement that Ukraine is not “ready for peace” and his threat to withdraw US support following a public meeting with Ukrainian leader Volodymyr Zelenskyy has raised concerns.

Keir Starmer stated on Sunday that Europe is “at a crossroads in history” during a summit in London with Zelenskyy and other leaders, aiming to form a peace deal and support Ukraine.

European defense bosses have long argued for higher weapons spending, a viewpoint now gaining attention from politicians due to the possible withdrawal of US support.

Shares of aerospace companies with significant defense revenues also rose on Monday. Airbus increased by 3%, Safran by 2.7%, and Rolls-Royce saw a 6% gain, hitting a new record high.

QinetiQ in Britain and Dassault Aviation in France saw increases of 8% and 14% respectively.

Holger Schmieding, an economist at investment bank Berenberg, stated that Europe and particularly Germany must raise defense spending for themselves and Ukraine beyond current plans.

Starmer announced last week that the UK will increase its defense spending to 2.5% of GDP by 2027, funded by a controversial cut in international aid spending.

French President Emmanuel Macron called on Europeans to increase annual defense spending to over 3% of GDP to counter the threat from Russia, while Germany’s likely next chancellor, Friedrich Merz, is also considering increasing defense spending.