Turkey's Eurofighter Jet Deal and the Resurgence of European Defense Ties

The global defense sector is undergoing a seismic shift, driven by geopolitical tensions, technological advancements, and a reimagining of strategic alliances. At the heart of this transformation lies Turkey's landmark $5.6 billion Eurofighter Typhoon jet deal, a transaction that not only modernizes Turkey's air force but also reignites European defense collaboration. For investors, this deal opens a window into a high-growth sector where European defense contractors and Turkey's burgeoning military-industrial complex are poised to thrive.

The Strategic Realignment: Why the Eurofighter Deal Matters

Turkey's acquisition of up to 40 Eurofighter Typhoon jets—jointly produced by BAE Systems (UK), Airbus (Germany), and Leonardo (Italy)—is more than a procurement; it is a geopolitical recalibration. For years, Turkey's exclusion from the F-35 program due to its S-400 purchase from Russia left a critical gap in its air capabilities. The Typhoon, a 4.5-generation multirole fighter, bridges this gap with superior radar systems, agility, and long-range missile compatibility. For European partners, the deal revives the Eurofighter program, which had faced declining orders and production risks.

The strategic implications extend beyond the aircraft itself. Germany's recent policy shift under Chancellor Friedrich Merz—approving the sale after years of hesitation—signals a pragmatic embrace of defense collaboration with NATO allies. This aligns with broader European efforts to reduce reliance on U.S. military hardware and assert strategic autonomy. For Turkey, the deal diversifies its procurement base while maintaining NATO ties, a balancing act that underscores its growing influence in the region.

Investment Opportunities in European Defense Contractors

The Eurofighter deal is a catalyst for European defense firms, particularly BAE Systems, Airbus, and Leonardo.

BAE Systems (UK): As the UK lead in the Eurofighter consortium, BAE stands to benefit significantly. The company's Warton plant in Lancashire, which assembles the Typhoon, has long faced production risks due to a lack of new orders. Turkey's $5.6 billion contract, alongside additional orders from Saudi Arabia and Qatar, ensures steady production through the early 2030s. BAE's 37% UK component rule in the Eurofighter program also bolsters its supply chain, with subcontractors like Rolls-Royce and Leonardo reaping indirect rewards.

Airbus (Germany): While not directly involved in the Eurofighter consortium, Airbus benefits from the broader defense spending surge. The company's military and space divisions are poised to capitalize on NATO rearming and global demand for advanced systems. With the Eurofighter deal reinforcing European defense collaboration, Airbus' role in next-gen projects like the Tempest program becomes even more critical.

Leonardo (Italy): As the avionics supplier for the Typhoon, Leonardo's revenue stream is tied to the program's longevity. The company's expertise in radar and electronic warfare systems positions it as a key player in the European defense ecosystem. The Typhoon's planned upgrades, including AI-driven avionics, will further solidify Leonardo's relevance in the global market.

Turkey's Military-Industrial Complex: A Rising Powerhouse

Parallel to the Eurofighter deal, Turkey's defense sector is undergoing a renaissance. In 2024, defense exports surged to $7.1 billion—a 103% increase from a decade prior—making Turkey the 11th largest arms exporter globally. This growth is driven by a blend of domestic innovation and strategic geopolitical positioning.

Key Players and Innovations:
- Baykar: The manufacturer of the iconic Bayraktar TB2 drone, which has redefined modern warfare. With exports to 31 countries, Baykar is investing $300 million in developing indigenous jet engines to reduce dependency on foreign suppliers.
- MKE: The state-owned Makine ve Kimya Endüstrisi (MKE) reported $1.2 billion in revenue in 2024, with 53% from exports. Its focus on small arms, artillery, and naval systems positions it as a cornerstone of Turkey's defense strategy.
- Roketsan: A leader in precision munitions and long-range missiles, Roketsan's Tayfun missile, tested in 2025, exemplifies Turkey's push into advanced missile technology.

Strategic Projects: Turkey's ambitions extend to fifth-generation fighter jets (KAAN), aircraft carriers (MUGEM), and destroyers (TF-2000). These projects, with over 80% domestic content, underscore a shift toward self-sufficiency while creating multiplier effects for local industries.

Risks and Considerations for Investors

While the opportunities are compelling, investors must navigate risks. Geopolitical tensions, such as Turkey's S-400 procurement and its actions in Syria and Libya, could strain relations with European partners. Additionally, the Eurofighter consortium's requirement for unanimous approval means a single country could still block the deal. For Turkey, economic instability and domestic political shifts may impact defense spending.

However, the strategic necessity of the Eurofighter deal—both for Turkey's air parity and Europe's industrial interests—provides a backstop. The UK's 3.5% GDP defense spending pledge by 2030 further stabilizes the sector.

Conclusion: A Dual-Opportunity Landscape

The Eurofighter deal and Turkey's military-industrial boom present a dual opportunity for investors. European defense contractors like BAE and Leonardo are positioned to benefit from sustained production and technological upgrades. Meanwhile, Turkey's defense sector offers exposure to a high-growth, export-driven industry. For those seeking diversification, ETFs like the PACX (SPDR S&P Aerospace & Defense ETF) and XUBK (iShares MSCI Turkey IMI ETF) provide indirect access to these trends.

As the global defense landscape evolves, the convergence of European collaboration and Turkish innovation marks a pivotal moment. For investors, the key lies in balancing long-term strategic value with short-term volatility—a challenge that rewards those who act decisively.