As global defense budgets rise and geopolitical tensions continue to shape security policy, investors are increasingly turning to exchange-traded funds (ETFs) for exposure to the defense sector. Defense ETFs with global exposure allow investors to participate in international military spending trends without concentrating solely on U.S.-based contractors. These funds offer diversification across regions, industries, and company sizes.
Why invest in global defense ETFs?
- Geopolitical diversification: Includes defense firms from Europe, Asia, and emerging markets alongside U.S. giants
- Rising military budgets: Countries across NATO, Asia-Pacific, and the Middle East are increasing defense allocations
- Technology exposure: Covers aerospace, cybersecurity, missile systems, drones, and surveillance technologies
- Export-driven growth: Global arms sales benefit companies that supply to multiple governments or cross-border alliances
Key criteria when evaluating global defense ETFs
Geographic allocation
ETFs with exposure to Europe, Israel, Japan, South Korea, and other key regions provide a more comprehensive picture of global defense dynamics.
Industry balance
Look for ETFs that include both traditional weapons manufacturers and modern defense tech companies (e.g., cybersecurity, space, AI-driven systems).
Holdings concentration
Evaluate whether the fund is heavily weighted toward a few large firms or diversified across mid- and small-cap companies globally.
Liquidity and expenses
Lower expense ratios and higher average daily volume help minimize tracking error and trading costs.
Top global defense ETFs to watch in 2025
iShares U.S. Aerospace & Defense ETF (ITA)
- Ticker: ITA
- Geographic exposure: Primarily U.S., but includes multinational exporters
- Top holdings: Raytheon, Lockheed Martin, Northrop Grumman
- Strength: High liquidity, focused exposure to major defense primes with global sales footprints
SPDR S&P Aerospace & Defense ETF (XAR)
- Ticker: XAR
- Geographic exposure: U.S.-focused with some indirect global sales exposure
- Weighting strategy: Equal-weighted, offering more exposure to mid-cap and emerging defense players
- Advantage: Balanced allocation can reduce overdependence on a few giants
Invesco Aerospace & Defense ETF (PPA)
- Ticker: PPA
- Geographic exposure: Primarily U.S., with some international revenue exposure
- Holdings: Boeing, L3Harris, General Dynamics
- Differentiator: Includes broader aerospace firms alongside pure defense contractors
ARK Space Exploration & Innovation ETF (ARKX)
- Ticker: ARKX
- Geographic exposure: Global
- Focus: Space and defense technologies, including satellite and aerospace infrastructure
- Notable: Includes international firms in space and surveillance that overlap with defense applications
VanEck Defense UCITS ETF (DFNS)
- Ticker: DFNS (available in Europe)
- Geographic exposure: Europe, U.S., Israel, Asia
- Focus: Tracks the Global Defense ESG Index
- Unique factor: Includes companies with revenue from defense contracts, cybersecurity, and aerospace, filtered for ESG compatibility
HAN-GINS Indxx Advanced Defense ETF (DFND)
- Ticker: DFND (available on LSE)
- Geographic exposure: Global
- Composition: Companies engaged in next-gen military systems, including AI and robotics
- Edge: Strong thematic focus on future defense technologies beyond traditional arms makers
Alternative options for indirect global defense exposure
MSCI World Industrials ETF variants
These often include multinational defense contractors and aerospace suppliers with strong export profiles. They may not be defense-specific but can offer partial exposure.
Country-specific defense stocks via regional ETFs
ETFs focused on countries like Israel, South Korea, or Japan may include local defense champions that are otherwise hard to access through global defense funds.
Outlook for global defense ETFs in 2025
- NATO and EU countries are increasing defense budgets toward or beyond 2% of GDP
- Asia-Pacific nations are expanding aerial, naval, and cybersecurity capabilities
- Demand for drones, autonomous weapons, and AI integration is accelerating
- Emerging markets are acquiring modern defense systems through partnerships and export contracts
These trends support sustained inflows into global defense ETFs, particularly those positioned across both traditional defense and next-generation systems.