After a long period of sustained success for global defence stocks and ASX ETFs, these have recently stalled.
A new report from Betashares points out the strange timing, considering the US's war in Iran.
Tom Wickenden, investment strategist at Betashares, said the first 12 days of the Iran conflict alone are estimated to have cost the US around US$16.5 billion, a reminder of how quickly modern warfare depletes equipment.
In response, the US is planning a sharp increase in defence spending, with a proposed budget of around US$1.5 trillion. If approved, it would represent the most significant year-on-year defence budget growth in history.
Importantly, that spending is expected to flow not only to traditional defence contractors, but also to newer players.
These could include areas such as AI, cybersecurity, and autonomous systems. These are becoming central to how wars are fought.
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What is global defence?
"Global defence ASX shares" refers to companies listed on the Australian Securities Exchange that are involved – directly or indirectly – in the defence and military sector.
These companies often have customers or operations beyond Australia.
In general terms, these companies fall into a few broad categories:
- Defence contractors and manufacturers
- Technology and cybersecurity firms
- Engineering, logistics and services providers
Prominent names in the ASX defence sector over the last year include:
Global defence spending continues
The aforementioned ASX defence stocks all shot higher in 2025 as global defence investment skyrocketed.
According to Betashares, while valuations do remain elevated, these increasingly reflect expectations of sustained profit growth rather than hype.
As a result of global spending developments, for the second year in a row major defence contractors saw their order books grow by over US$100bn.
The defence contractor order books we track now collectively exceeded US$1 trillion for the first time in history. Record levels of contracted future orders are a positive sign for future profit growth and may support a sustained longer-term rise in defence company share prices.
How to target defence ASX ETFs
Betashares said the Iran war is likely to lead to increased spending to restock US inventories. This reinforces the need for Europe to boost its defence capabilities.
However, it may be the longer-term implications that matter most for investors, long after any resolution in Iran.
Russia's invasion of Ukraine accelerated defence spending, Trump coming back into power fractured the US security umbrella, and now the Iran conflict may be turning these geopolitical trends into a lasting influence on investment markets, rather than a short-term disruption.
For investors, this may strengthen the case for long-term exposure to the defence sector, as part of a broader equities allocation.
Two ASX ETFs investors may consider are:
- Betashares Global Defence ETF – Beta Global Defence ETF (ASX: ARMR) – Seeks to provide focused exposure to leading companies that are headquartered in NATO or closely aligned countries, and which derive more than 50% of their revenues from the development and manufacturing of military and defence equipment as well as defence technology.
- Global X Defence Tech ETF (ASX: DTEC) – Targets companies at the forefront of defence innovation — specifically capturing AI, drones, and cybersecurity as the future drivers of defence.
