Defence ETFs Outperform Amid Geopolitical Tensions

Exchange-traded funds focused on defence and aerospace have been stellar performers in the current geopolitical climate, far outpacing broader markets. Heightened conflict risk and surging military budgets have propelled defence equities upward, and ETFs concentrating in this sector are delivering impressive returns. For instance, a new European defence ETF, the STOXX Europe Aerospace & Defense (ticker EUAD), is already up about 39% year-to-date – dramatically outperforming the U.S. S&P 500 (which was down around 5% early in the year) and even U.S.-focused defence ETFs. On the U.S. side, the iShares U.S. Aerospace & Defense ETF (ITA) has posted solid gains (roughly 5–15% YTD depending on the latest date) but still lags some of its European counterparts. The divergence underscores how European defence stocks have been “turbocharged” by unprecedented regional rearmament. Overall, defence-themed ETFs as a group have significantly outperformed major indices amid the ongoing war in Ukraine and elevated tensions in the Middle East and East Asia.