7 Best Defense ETFs to Buy for 2026: U.S. News Report
- U.S. News identifies 7 best defense ETFs for 2026 based on performance and exposure.
- Geopolitical conflicts and increased defense budgets are boosting the sector.
- ETFs offer diversified exposure to aerospace, defense, and cybersecurity firms.
Defense ETFs Gain Traction Amid Global Tensions
U.S. News has released its list of the 7 best defense exchange-traded funds (ETFs) to buy for 2026. The report comes as global military spending continues to rise, driven by ongoing conflicts and geopolitical uncertainty.
Defense ETFs have become a popular choice for investors seeking exposure to the sector without picking individual stocks. They offer diversification across companies involved in aerospace, defense, cybersecurity, and related technologies.
Top Performing Funds in the List
The selection includes funds that track indices of major defense contractors and suppliers. Among them are ETFs focused on U.S. and European firms, as well as those with a global footprint.
Funds like the iShares U.S. Aerospace & Defense ETF (ITA) and the SPDR S&P Aerospace & Defense ETF (XAR) feature prominently. Both have shown strong returns over the past year, reflecting increased government contracts and export orders.
What's Driving the Interest
Analysts point to several factors behind the sector's appeal. Rising defense budgets in NATO countries, tensions in Eastern Europe and the Indo-Pacific, and modernization programs are all contributing to higher revenues for defense firms.
The report also highlights cybersecurity-focused ETFs, as nations and corporations invest heavily in digital defense. These funds have gained attention due to the growing threat of cyberattacks on critical infrastructure.
Investor Considerations
While the outlook appears positive, experts caution about potential risks. The defense sector can be sensitive to geopolitical changes and government policy shifts. Budget cuts or peace deals could dampen demand.
Additionally, some funds carry higher expense ratios than broad-market ETFs. Investors are advised to review holdings and fees carefully before committing capital.
What to Watch Next
The defense ETF space is likely to remain in focus as global tensions persist. Investors will monitor upcoming defense budgets and geopolitical developments for further cues on sector performance. Analysts expect continued inflows into these funds through 2026.