Russia's invasion of Ukraine in 2022 kickstarted the global defence spending investment megatrend.
The staunch US 'America First' policy under US President, Donald Trump, exacerbated it.
NATO's massive commitment last year to more than double its defence spending from 2% of GDP to 5% within 10 years reflected it.
And today, the Iran war has brought defence capabilities into even sharper focus, says CommSec analyst, James Gruber.
Image source: Getty Images
Defence spending continues to rise
In an article, Gruber says global defence spending has increased by almost 30% over three years – the fastest rise since the 1980s.
This has directly impacted the earnings of ASX defence companies, whose share prices have soared since 2022.
In 2024, the global defence spending trend was strong enough to warrant the launch of three exchange-traded funds (ETFs) on the ASX.
Then came the Iran war, which further highlighted the need for domestic defence capacity, not to mention energy security, for all nations.
ASX defence shares and ETFs had a particularly strong run in 2024 and 2025.
They have cooled in 2026, alongside the rest of the market, despite the Iran war keeping the defence theme front of mind for investors.
Bearing in mind that many factors can influence a company's stock value, let's take a look at the share price movements of four ASX defence shares and three thematic ASX ETFs since 2022, and also since the Iran war began on 28 February, to get an idea of the impact.
Austal Ltd (ASX: ASB)
Austal is an Australian defence shipbuilder and services provider that builds ships for the Australian Navy, US Navy, and other clients.
The Austal share price has doubled over the past four years. The ASX defence share hit a record $8.82 in January.
The Iran war began on 28 February. Since then, Austal stock has dropped 22% to $4.01 per share.
Droneshield Ltd (ASX: DRO)
Droneshield is a counter-drone technology company that makes drone defence systems.
Gruber says DroneShield has a niche, offering a range of equipment for detection and neutralisation, and aims to be a one-stop shop.
The Droneshield share price has soared 1,133% over the past four years. The ASX defence share hit a record $6.71 in October.
Since the Iran war began, Droneshield shares have fallen 18% to $2.96 per share.
Titomic Ltd (ASX: TTT)
Titomic manufactures lightweight titanium parts and provides industrial-scale metal additive solutions.
These solutions include its patented Titomic Kinetic Fusion cold spray technology for fast repairs of military equipment.
The Titomic share price has leapt 145% since 2022. The ASX defence share hit a 52-week high of 36 cents in October.
Since the Iran war began, Titomic shares have lifted 17% to 25 cents apiece today.
Electro Optic Systems Holdings Ltd (ASX: EOS)
Electro Optic specialises in advanced weapon systems, counter-drone solutions, and space domain awareness.
The Electro Optic Systems share price has ripped 468% since 2022. The ASX defence share hit a record $12.58 in March.
Since the Iran war began, Electro Optic Systems shares have risen 20% to $10.80 today.
What about ASX defence ETFs?
The following three ASX ETFs were launched in 2024. Let's take a look at their performance.
Vaneck Global Defence ETF (ASX: DFND)
DFND ETF holds just 36 shares and tracks the MarketVector Global Defence Industry (AUD) Index before fees.
DFND ETF is 75% higher since inception in September 2024. The ASX defence ETF hit a record $45.47 per unit in January.
Since the Iran war began, DFND ETF units have drifted 11% lower to $35.25 today.
Global X Defence Tech ETF (ASX: DTEC)
ASX DTEC invests in 37 shares and seeks to track the Global X Defense Tech Index before fees.
The DTEC ETF price has increased 59% since inception in October 2024. The ASX defence ETF hit a record $21.50 in January.
Since the Iran war began, DTEC ETF units have fallen 16% to $15.96.
Betashares Global Defence ETF (ASX: ARMR)
ASX ARMR invests in up to 60 companies headquartered in NATO nations or allied countries, such as Australia and Japan.
It seeks to mirror the returns of the VettaFi Global Defence Leaders Index before fees.
ARMR ETF units have ascended 55% since launching in October 2024. The ASX defence ETF hit a record $29.35 in January.
Since the Iran war began, ARMR ETF units have descended 11% to $23.50 today.
