War for an Economy: Who Benefits and Which Industries Gain
Geopolitical conflict reshapes economies faster than any quarterly report. In 2026, Europe faces one of its most significant industrial recalibrations since the Cold War. The renewed emphasis on defense spending, domestic manufacturing, and strategic autonomy is not just a political story; it is a commercial one. Companies capable of pivoting operations to meet the demands of wartime logistics, munitions, and infrastructure are seeing both revenue acceleration and valuation uplift.
Governments now act as both regulators and de facto market makers, directing capital into sectors that were previously peripheral. The Swedish startup sector, for example, is aggressively pursuing opportunities in explosives and dual-use technologies, betting that national security imperatives will open sustained market channels. Firms that understand the convergence of industrial capacity, strategic defense needs, and investor appetite are positioned to capture outsized returns.
The Economic Chokepoint of Conflict
Conflict creates immediate bottlenecks in supply chains, commodity access, and capital allocation. Firms with vertically integrated production experience both a defensive advantage and increased bargaining power with governments seeking uninterrupted supply of critical materials. Companies like Rheinmetall in Germany, BAE Systems in the United Kingdom, and Saab in Sweden have reported pre-2026 backlog expansions due to government procurement cycles that prioritize local production and rapid scalability.
Investors are now evaluating companies not merely on profit margins but on strategic relevance. Access to government contracts, the ability to scale under political oversight, and technological readiness are becoming primary metrics in enterprise valuation. The market is assigning premium multiples to firms with demonstrable resilience in wartime conditions.
Strategic Industrial Shifts
Historically, Europe’s explosives and munitions industries relied heavily on imports and decentralized production networks. The events of 2025–2026 have forced a structural pivot toward domestic innovation and self-reliance. This shift extends beyond defense contractors. Energy firms, infrastructure companies, and materials producers are repositioning their operations to meet dual-use demand—where industrial inputs serve both civilian and defense needs.
In Sweden, startups such as Hexagen and Orica Sweden are focusing on industrial explosives with applications spanning mining, infrastructure, and national defense. Their value proposition is clear: by combining agility with compliance, they offer governments an alternative to legacy suppliers that are often constrained by international regulation or export bottlenecks.
Investment Opportunities in Wartime Economies
For private equity and venture capital, war-driven industrial demand provides a rare environment of high visibility and predictable revenue streams. Governments are willing to underwrite risk-adjusted investments in companies that can scale quickly and provide strategic assets. Investors are eyeing sectors including explosives manufacturing, cybersecurity for industrial systems, logistics infrastructure, and drone-enabled monitoring technologies.
The financial implications are measurable. Defense stocks in Europe have outperformed general indices by 12 to 18 percent since early 2025, and strategic startups in munitions and dual-use technologies are securing funding rounds at previously unseen valuations.
Who Truly Benefits
While geopolitical instability introduces volatility, specific industries benefit disproportionately. The winners are not limited to traditional defense contractors. Mining and chemical suppliers, specialized AI logistics firms, and precision engineering startups are all part of the wartime industrial ecosystem. In practice, these companies enjoy government-backed contracts, accelerated R&D budgets, and premium pricing for critical materials.
The Human and Industrial Friction Points
Conflict introduces friction across labor, supply chains, and regulatory compliance. Skilled workforce shortages in explosives engineering or AI-assisted logistics create bottlenecks that can delay production. Companies that mitigate these risks with advanced training programs or automation gain a first-mover advantage. Similarly, compliance with European Union and NATO safety standards is non-negotiable; failure can result in contract revocation or legal penalties.
Case Study: Sweden’s Explosives Startups
Sweden’s emerging explosives sector illustrates the commercial dynamics of wartime opportunity. Startups are not only innovating in chemical formulations but also in production efficiency and safety protocols. The government provides capital incentives while also ensuring rigorous regulatory oversight, effectively creating a venture-grade industrial sandbox. Startups benefit from early revenue streams, while governments gain domestic industrial capacity that enhances security and reduces reliance on imports.
War-Era Industrial Strategy
| Peacetime Approach | War-Era Adaptation |
|---|---|
| Reliance on foreign arms imports | Domestic munitions and explosives production |
| Short-term defense contracts | Long-term government-backed industrial commitments |
| Limited startup involvement | Agile startups driving innovation in explosives and dual-use technology |
| Fragmented supply chains | Vertically integrated, resilient industrial ecosystems |
| Reactive policy during conflict | Proactive industrial strategy anticipating geopolitical risks |
| Conventional manufacturing | Advanced, technology-enabled production lines |
| Minimal regional coordination | Pan-European and NATO industrial clusters |
The table above highlights the fundamental shift from reactive to proactive industrial strategy. Governments now act as strategic investors, providing certainty and scale to companies willing to align with national security priorities.
Industrial Winners Beyond Defense
The ripple effects of conflict extend into adjacent sectors. Infrastructure and logistics companies that can handle high-risk routes, chemical suppliers who produce essential explosive components, and AI firms specializing in predictive supply-chain analytics all experience revenue acceleration. Similarly, cybersecurity firms focused on protecting industrial systems are becoming critical partners in the defense ecosystem.
Long-Term Strategic Implications
While the immediate economic beneficiaries are clear, the long-term implications extend into industrial policy and capital allocation. Firms capable of adapting to wartime supply chains are likely to enjoy enduring market positions, even after conflict resolution. Conversely, companies that rely heavily on international supply or outdated manufacturing techniques risk obsolescence.
Government Influence on Market Dynamics
European governments are intentionally shaping the market by funding strategic sectors. Incentives, grants, and procurement guarantees provide a liquidity moat for firms aligned with national security objectives. Investors now track policy announcements as closely as quarterly earnings, understanding that government intervention can create or destroy value rapidly.
M&A Activity and Consolidation
The current environment has sparked mergers and acquisitions. Legacy firms are acquiring startups with niche capabilities, while venture-backed companies explore strategic partnerships with defense contractors. This consolidation reduces risk, increases industrial capacity, and accelerates technology integration. Investors are advised to view these moves as risk-mitigated growth rather than speculative transactions.
Global Comparisons
While Europe focuses on domestic capacity, the United States and Israel have similarly leveraged conflict-driven industrial investment. U.S. defense contractors such as Lockheed Martin and Northrop Grumman report robust backlogs, while Israeli companies dominate niche markets in explosives and drone technologies. European startups aim to replicate these models, combining innovation velocity with strategic funding support.
The Investor Lens
For institutional investors, understanding which firms gain from wartime economies is critical. Metrics such as government contract size, R&D capacity, supply-chain resilience, and workforce specialization have become core evaluation criteria. Firms demonstrating adaptability and scalability often achieve higher valuations, reduced cost of capital, and improved exit opportunities.
Conclusion
The war economy is not a simple story of destruction; it is a story of industrial realignment, strategic investment, and selective opportunity. Companies capable of pivoting toward domestic production, dual-use innovation, and resilient supply chains are benefiting while others lag behind. For boards, executives, and investors, understanding the intersection of geopolitics and commerce is no longer optional—it is essential to capturing value in an increasingly unpredictable market.
