Energy prices have been all over the place following the conflict in the Middle East. The share prices of oil companies were sent sharply higher, before returning back down again.
Trying to time the market when there are shocks such as this can be a bit of a fool's game. Instead, if you believe that global instability is likely to remain high and want to take a long-term view, it's reasonable to infer that global defence spending will also remain higher than normal, and that energy prices might stay high.
On the spending front this is indeed the case with many countries around the world looking to bolster their armed forces following less confidence in global alliances.
So where does that leave investors?
On the Australian market there are some defence-specific stocks such as Austal Ltd (ASX: ASB), DroneShield Ltd (ASX: DRO) and Electro Optic Systems Ltd (ASX: EOS), but if you're looking for less volatility, the following defence ASX ETFs might be the way to go.
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Global X Defence ETF (ASX: DTEC)
DTEC ETF is a fairly modestly-sized defence ETF which says in its fact sheet that global defence spending has grown at an annualised rate of 4.3% for the past 40 years.
It goes on to say:
Increasing global tensions are driving nations to boost defence spending, reflecting heightened national security concerns and a competitive push to maintain strategic advantage.
DTEC says it invests in companies "with a revenue filter' with exposure to AI, drones and cybersecurity, "capturing the future of innovation in defence".
VanEck Global Defence ETF (ASX: DFND)
DFND ETF is quite different from the previous ASX ETF, in that it specifically aims to invest in larger companies that generate at least 50% of their revenues from the defence sector.
The companies it invests in must have a market capitalisation greater than US$1 billion and a 3-month average daily trading volume of at least US$1 million.
This defence ETF has $315.4 million in net assets currently and is invested into 36 companies.
DFND says it provides, "exposure to the largest global companies involved in aerospace and defence, research and consulting, application software and electronic equipment & instruments, that are typically under-represented in benchmarks''.
Betashares Global Defence ETC (ASX: ARMR)
ARMR ETF currently has a wider remit still, providing exposure to "up to 60" global companies which derive more than 50% of their revenues from defence.
At the moment these companies include BAE Systems, Lockheed Martin, General Dynamics and Palantir Technologies.
ARMR will only invest in companies which are headquartered in NATO or NATO-allied countries.
Betashares Global Energy Companies Currency Hedged ETF (ASX: FUEL)
And finally, if you're looking for broad exposure to the energy sector, this Betashares ASX ETF provides just that, investing globally into companies including Chevron, ExxonMobil and Shell.
