According to the Stockholm International Peace Research Institute, global military spending is set to reach $2.9 trillion in 2025, marking a 14% year-over-year increase in Europe from 2024. This surge is largely driven by ongoing conflicts, particularly the war between Russia and Ukraine, and a broader rearmament trend among NATO members, which saw their military spending rise at the fastest pace since 1953.
For investors, the Select STOXX Europe Aerospace & Defense ETF (BATS: EUAD), launched in late 2024, offers targeted exposure to European defense companies, holding 23 stocks primarily involved in military and aeronautics industries. However, it comes with a higher expense ratio of 0.50%. Alternatively, the Global X Defense Tech ETF (NYSEARCA: SHLD) provides broader diversification with approximately 50 holdings, though over 62% of its portfolio is weighted toward U.S. firms.
In terms of performance, the actively managed U.S. Global Technology and Aerospace & Defense ETF (NYSEARCA: WAR) has seen a remarkable 42% year-to-date increase, attractive compared to the iShares U.S. Aerospace & Defense ETF (BATS: ITA), which returned only 12% YTD. Investors seeking European defense market exposure may face challenges but can leverage various ETFs tailored to their needs.
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