With only one nuclear arms pact left between the US and Russia, a new arms race is possible

The long-standing framework of nuclear arms control between the US and Russia is rapidly eroding, with Russia recently ending self-imposed restrictions on intermediate-range missile deployment following the 2019 US withdrawal from the INF Treaty. This leaves only the New START treaty, which is functionally defunct and set to expire in February 2026, with Russia having already suspended its participation. Experts warn that this breakdown, coupled with a lack of trust and the rise of other nuclear powers like China, significantly increases the risk of a new arms race and reduces transparency, elevating global strategic instability.

Analysis

The strategic landscape is undergoing a significant destabilization as the decades-old framework of bilateral nuclear arms control between the U.S. and Russia collapses. With Russia's recent announcement to end self-imposed restrictions on intermediate-range missiles, following the 2019 U.S. withdrawal from the INF Treaty, only the New START treaty remains. However, this last pact is described as 'functionally dead' and is set to expire in February 2026, with Russia having already suspended its participation and halted on-site inspections. While arsenals are smaller than their 1986 peaks, the U.S. and Russia still possess approximately 87% of the world's nuclear warheads. The erosion of these treaties, driven by a profound lack of trust and the strategic complication of China's unconstrained military buildup, fosters a high-risk environment. Experts warn this could ignite a 'competitive spiral' or a new arms race, not just between the two historical adversaries but also involving new powers, thereby increasing global geopolitical risk and market uncertainty, as reflected in the strongly negative sentiment and high market impact score.

Key Decisions for Investors

• Given the heightened risk of a new arms race and increased military spending, investors should consider increasing exposure to the aerospace and defense sectors, particularly to firms specializing in strategic deterrence, missile systems, and next-generation defense technology.
• The breakdown of global security architecture introduces significant tail risk, suggesting a prudent strategy would involve hedging against increased market volatility by allocating capital to traditional safe-haven assets such as gold and U.S. Treasuries.
• Closely monitor geopolitical developments leading up to the New START treaty's expiration in February 2026, as the absence of a successor agreement will be a critical inflection point for global stability and will likely increase risk premiums across asset classes.