Aerospace and defense ETFs have surged this year amid escalating geopolitical conflicts. In addition to the ongoing wars in the Middle East and Ukraine, tensions between India and Pakistan and threats of a Chinese attack on Taiwan continue 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, which have been climbing since the start of the Russia–Ukraine war, have soared in 2025 as many nations ramp 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.
The iShares U.S. Aerospace & Defense ETF ITA is a market-cap-weighted ETF. Its top holdings include GE Aerospace GE, RTX Corporation RTX, and Boeing BA.
The SPDR S&P Aerospace & Defense ETF XAR follows an equal-weighted index, while 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, which holds European aerospace and defense stocks, is the best performer in the group with a 65% gain year to date.
The Global X Defense Tech ETF SHLD focuses on companies in the industrials, cybersecurity, AI, and drone systems sectors that serve the defense industry.
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The Boeing Company (BA): Free Stock Analysis Report GE Aerospace (GE): Free Stock Analysis Report Global X Defense Tech ETF (SHLD): ETF Research Reports iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports Invesco Aerospace & Defense ETF (PPA): ETF Research Reports SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports RTX Corporation (RTX): Free Stock Analysis Report Select STOXX Europe Aerospace & Defense ETF (EUAD): ETF Research Reports Axon Enterprise, Inc (AXON): Free Stock Analysis Report Palantir Technologies Inc. (PLTR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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