Defense ETFs Soaring Amid Global Tensions: Key Trends and Top Performers
This year has seen a surge in the performance of aerospace and defense ETFs, driven by escalating geopolitical conflicts. In addition to ongoing wars in the Middle East and Ukraine, tensions between India and Pakistan and threats of a Chinese attack on Taiwan have continued to intensify.
Rising global tensions have led to increased defense spending worldwide. In the U.S., defense spending remains one of the few areas with strong bipartisan support. President Trump has proposed a $1 trillion national defense budget for fiscal year 2026—up 13% from FY 2025.
European defense stocks have also soared in 2025, climbing since the start of the Russia–Ukraine war. Many nations are ramping up military spending, partly in response to pressure from Trump. While some of this spending will benefit U.S. defense contractors, European firms are likely to be major beneficiaries.
On the commercial side, global air traffic continues to grow. A rising middle class in emerging economies and increasing incomes are expected to be key drivers of future air travel demand.
One of the top-performing aerospace and defense ETFs is the iShares U.S. Aerospace & Defense ETF (ITA), which is a market-cap-weighted ETF with top holdings including GE Aerospace (GE), RTX Corporation (RTX), and Boeing (BA). Another popular option is the SPDR S&P Aerospace & Defense ETF (XAR), which follows an equal-weighted index. The Invesco Aerospace & Defense Portfolio (PPA) tracks a modified market-cap-weighted index of companies involved in defense, military, homeland security, and space industries.
The Select STOXX Europe Aerospace & Defense ETF (EUAD) has been the best performer in the group with a 65% gain year to date. This ETF holds European aerospace and defense stocks and has seen significant growth due to increased military spending in Europe.
Another notable ETF is the Global X Defense Tech ETF (SHLD), which focuses on companies in the industrials, cybersecurity, AI, and drone systems sectors that serve the defense industry.
To learn more about these and other aerospace and defense ETFs, please watch the short video above. If you're looking for the latest recommendations from Zacks Investment Research, you can download their free report on 7 Best Stocks for the Next 30 Days by clicking the link below.
In conclusion, aerospace and defense ETFs have seen significant growth this year due to increased global tensions and rising defense spending. Whether you're investing in individual stocks or through an ETF, it's important to do your research and understand the risks involved in this sector.
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This article was originally published on Zacks Investment Research (zacks.com). For more information on aerospace and defense investments, please visit their website.
