The recent, brutal assault on Israel by Hamas holds significant consequences for both geopolitical stability and global markets. Last Monday, defense stocks, oil, and safe-haven assets surged, while Israeli stocks plunged.

According to The Wall Street Journal, Iran helped plan the attack, which could derail the recent easing of its tensions with the Biden administration and the removal of restrictions on its oil exports.

Another major concern is that Iran-backed Hezbollah in Lebanon, which shares a northern border with Israel, might step up attacks. Hezbollah is much more powerful and better equipped than Hamas.

If Iran escalates the war, and Israel ends up fighting on several fronts, defense stocks could rally further.

Shares of Northrop Grumman (NOC Quick QuoteNOC - Free Report) have surged about 16% since the start of the conflict, while those of Lockheed Martin (LMT Quick QuoteLMT - Free Report) and General Dynamics (GD Quick QuoteGD - Free Report) are about 10% higher. These shares have been underperforming this year due to uncertainty about the defense budget.

Rising geopolitical tensions could result in increased defense spending by the US and its European allies. Increasing defense spending is one of the very few areas that the two parties agree on.

The iShares U.S. Aerospace & Defense ETF (ITA Quick QuoteITA - Free Report) tracks a market-cap-weighted index of companies in the aerospace and defense sector. Raytheon Technologies (RTX Quick QuoteRTX - Free Report) , Boeing (BA Quick QuoteBA - Free Report) and Lockheed Martin are its top holdings.

The SPDR S&P Aerospace & Defense ETF (XAR Quick QuoteXAR - Free Report) is an equal-weighted ETF. The Invesco Aerospace & Defense Portfolio (PPA Quick QuotePPA - Free Report) invests in companies involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations.

Please watch the short video above to learn more about these ETFs.