European defense stocks keep strengthening as investors bet that government spending will rise amid doubts over the US commitment to the continent's security.

Ahead of his meeting this week with President Donald Trump in the White House, Prime Minister Keir Starmer said Britain would raise defense spending to 2.5% of GDP by 2027 — up from 2.3%.

Starmer plans to reduce the UK's international aid budget to find an additional £13.4 billion a year for defense.

Shares in London-listed aerospace and defense company BAE Systems jumped as much as 4.5% on the announcement, bringing the increase this year to just over 17%.

Analysts at Deutsche Bank last week described its annual results as strong, noted the record order backlog of £78 billion ($98 billion), and maintained their "buy" recommendation on the stock.

Stocks in defense firms have also been boosted by Sunday's German election, as security becomes a key topic of talks to form a coalition government. The STOXX Europe Total Market Aerospace & Defense index has gained almost 15% this year.

The conservative CDU grouping won the biggest share of the vote, meaning leader Friedrich Merz is set to lead the next government.

Merz has vowed to prioritize European security, continue supporting Ukraine — and wants the continent to become less dependent on the US.

Shares in Germany's Rheinmetall have soared 57% this year. It is Germany's biggest defense company and makes armored fighting vehicles and personnel carriers.

Shares in French firm Thales, which manufactures military equipment including drones, have added 37% this year. Meanwhile, Italy's Leonardo, one of the manufacturers of the Eurofighter Typhoon jet, has notched up a 41% share price gain since the start of January.

Defense and immigration would be the "most immediate issues" in Germany's coalition talks, analysts at Deutsche Bank wrote in a note on Monday.

"Foreign policy developments over the last fortnight have provided a political pivot for both parties to commit to greater defense spending. Although a new target may be formulated only after the NATO summit in June, we would assume that defense spending will likely rise to at least 2.5% of GDP over the next term, with a meaningful increase as early as 2026."