Global Defense Spending Surge: Why Aerospace & Defense ETFs Are Positioned to Soar

Geopolitical tensions are reshaping global military investment patterns, and the aerospace & defense sector is experiencing a profound shift that extends far beyond recent political developments. The convergence of regional conflicts, great power competition, and technological advancement is creating a sustained catalyst for defense spending acceleration.

The Macro Drivers Behind Defense Stock Momentum

Multiple interconnected factors are propelling defense-related investments to new heights. Territorial disputes spanning the Asia-Pacific region, European security concerns following the Russia–Ukraine conflict, and Middle Eastern instability have collectively triggered a rearmament cycle among global governments. Rather than viewing these tensions as temporary disruptions, major economies are treating them as structural challenges requiring long-term military modernization.

Research from Global X projects that global defense expenditures will reach $3.6 trillion by 2030—a 33 percent increase from 2024 levels. This trajectory reflects not merely increased budgets, but a fundamental shift in how nations allocate resources to security infrastructure. The investment focus extends beyond conventional weaponry to emerging domains: artificial intelligence integration, autonomous drone systems, and advanced cyber defense capabilities are commanding unprecedented funding levels.

U.S. and European Defense Markets Lead the Growth Wave

Domestically, defense spending maintains rare bipartisan support across the political spectrum, providing stability and predictability for defense contractors and ETF investors alike. This consensus position shields the sector from typical budget fluctuations that affect other government-funded industries.

European defense stocks have demonstrated particularly strong momentum, sustaining momentum that began with the Ukraine conflict and continued accelerating through 2025 as NATO member states elevated military commitments. The brief pullback observed in late 2024 proved temporary, as regional security assessments prompted governments to increase allocations despite peace negotiations.

Capturing the Aerospace & Defense Opportunity

Investors seeking exposure to this sector have multiple avenues through specialized ETFs: the iShares U.S. Aerospace & Defense ETF (ITA) provides broad domestic market access, while the SPDR S&P Aerospace & Defense ETF (XAR) offers complementary exposure. The Global X Defense Tech ETF (SHLD) emphasizes technology-driven defense innovations, and the Select STOXX Europe Aerospace & Defense ETF (EUAD) captures the European market momentum.

These funds maintain substantial positions in industry leaders including GE Aerospace, Lockheed Martin, Northrop Grumman, Boeing, and Palantir Technologies. Each represents a different segment of the defense industrial base—from legacy contractors to emerging technology providers—ensuring diversified exposure across the sector’s growth drivers.

Additional Growth Vectors: Commercial Aerospace Expansion

Beyond the geopolitical catalyst, commercial aerospace represents a complementary growth story. Rising middle-class populations in emerging economies are generating strong travel demand growth expectations. Airlines continue expanding capacity, and manufacturers are benefiting from sustained demand for new aircraft and components.

The Investment Thesis

The aerospace & defense sector’s momentum reflects more than headline-driven volatility. Structural increases in government spending, technological transformation within the military-industrial complex, and bipartisan political support create conditions for sustained sector outperformance. Whether evaluated through military spending projections, geopolitical risk assessment, or long-term technology adoption trends, the indicators consistently point toward continued sector strength for investors maintaining aerospace & defense ETF positions.