The global security landscape experienced significant volatility at the very start of 2026. Following the high-stakes abduction of Venezuelan leader Nicolás Maduro by U.S. forces, Donald Trump’s focus has turned sharply toward Tehran. 

Notably, the U.S. President has recently issued direct threats of military intervention in Iran if the government cracks down on the domestic protestors. These protests, now in their second week, were sparked by a collapsing economy and a rapidly devaluing currency, with reports indicating security forces have already killed at least 19 protesters. 

In response to Trump’s intervention threat, Iranian officials stated that any U.S. interference would cross a "red line" and that American bases in the region would become "legitimate targets."

Such geopolitical flashpoints, which might potentially turn into military conflict between the two nations, may catalyze increased spending and procurement of weapons, benefiting major defense contractors. 

Amid this backdrop, investors seeking to benefit from the escalating crisis between the United States and Iran may add a few prominent defense exchange-traded funds (ETFs) to their watchlist.

Beneficiaries of the Iran-US Conflict

Individual U.S. defense giants like Lockheed Martin (LMT Quick QuoteLMT - Free Report) , Northrop Grumman (NOC Quick QuoteNOC - Free Report) and RTX Corp. (RTX Quick QuoteRTX - Free Report) have a well-documented history of witnessing share price surges during earlier U.S.-Iran frictions and can be expected to benefit in case Trump’s threat turns into reality. 

In addition, U.S. defense giants are major weapons suppliers for Israel, which has been using American-made weapons against its foes (including Hamas, Hezbollah and Iran) for decades. 

For instance, Israel purchases Lockheed’s combat-proven defense products, including the F-35 stealth fighter and C-130J Super Hercules aircraft, Multiple Launch Rocket System (“MLRS”), radars, rockets, fire control and guidance systems, along with a few more equipment. On the other hand, RTX’s Raytheon unit, in partnership with Rafael Advanced Defense Systems, helps defend Israel’s populated areas and critical assets with the Iron Dome Weapon System.

Moreover, following the outbreak of war between Israel and Iran in June 2025, the Trump administration deployed Northrop-made B2 stealth bomber jets to target Iran’s nuclear sites, coordinating its military campaign with Israel (as reported by BBC). Also, RTX’s Tomahawk cruise missiles were used in strikes on Iran's nuclear sites in June. 

While these "prime" contractors have historically captured headlines, a broader ecosystem of sub-system and technology providers, such as L3Harris Technologies (LHX Quick QuoteLHX - Free Report) for its communications systems and sensors, has experienced and can be expected to witness rising demand, (if U.S.-Iran conflict flares up) creating a ripple effect across the defense industry.

The Strategic Case for Defense ETFs

While individual stocks offer high-octane potential, Defense ETFs holding the aforementioned stocks might be a more strategic choice for a prudent investor in the 2026 climate. Investing in single entities carries significant "program risk", like Lockheed Martin facing long-term pressure as the Pentagon shifts focus toward cheaper, autonomous drone swarms.

ETFs provide a diversified shield against the failure of a single contractor while capturing the broad "super-cycle" of increased global military spending triggered by the Venezuela-Iran axis of tension. By holding a basket of stocks, investors can benefit from the general trend of "maximum pressure" foreign policy without being derailed by one company’s earnings miss or regulatory hurdle.

Defense ETFs to Gain

Considering the aforementioned discussion, investors may add the following defense ETFs to their watchlists and consider investing if they deem them suitable, in an effort to capitalize on the renewed era of global instability.

iShares U.S. Aerospace & Defense ETF (ITA Quick QuoteITA - Free Report)

This fund, with assets worth $13.86 billion, offers exposure to 41 U.S. companies that manufacture commercial and military aircraft and other defense equipment. Its top 10 holdings include RTX (15.83%), NOC (4.46%), LMT (4.43%) and LHX (4.42%). 

ITA has soared 60% over the past year and gained 5.5% since Dec. 28, 2025, when mass demonstrations erupted across multiple cities in Iran. The fund charges 38 basis points (bps) as fees. 

Global X Defense Tech ETF (SHLD Quick QuoteSHLD - Free Report)

This fund, with net assets worth $5.63 billion, offers exposure to 49 companies positioned to benefit from the increased adoption and utilization of defense technology. Its top 10 holdings include LMT (7.93%), RTX (7.86%), LHX (4.47%) and NOC (4.37%). 

SHLD has rallied 90.5% over the past year and gained 8.1% since Dec. 28, 2025. The fund charges 50 bps as fees. 

Invesco Aerospace & Defense ETF (PPA Quick QuotePPA - Free Report)

This fund, with a market value worth $7.36 billion, offers exposure to 61 companies involved in the development, manufacturing, operations and support of U.S. defense, homeland security and aerospace operations.  Its top 10 holdings include RTX (8.64%), LMT (7.72%), NOC (5.69%) and LHX (4.08%). 

PPA has surged 46.8% over the past year and gained 5.8% since Dec. 28, 2025. The fund charges 58 bps as fees.