Global conflict has erupted in 2026, from South America to the Middle East. With energy at the center of the picture, markets face potentially serious volatility. One area that is poised to benefit, however, has been defense. Defense stocks like drone companies have benefitted from demand, and from conflict offering an opportunity for new technologies to operate amid serious tragedy. Increasingly, drones define modern warfare — and may come to dominate defense spending.
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As such, investors may want to look to defense stocks as a category in which to invest. Certain ETFs offer significant exposure to defense stocks while also crossing over into other areas that benefit from similar tech. Drone tech provides a keen example, with military uses for drones driving investment into their uses for other purposes like search and rescue, agriculture, and more.
ETFs provide a variety of ways to get exposure to defense stocks, including drones. The Rex Drone ETF (DRNZ) provides targeted exposure to the drones industry. DRNZ charges a 65 basis point (bps) fee to track the VettaFi Drone Index. In doing so, it invests in global equities from firms that manufacture and develop drones and UAVs.
The index’s constituents must have at least 50% of assets and derive at least 50% of revenues from drone or UAV development or manufacturing. The index takes a modified market cap-weighted index approach, with 80% into pure-play drone firms and 20% into diversified names.
That has helped DRNZ return 29.4% over the last three months, according to ETF Database data. It has done so via exposure to key names in drones, specifically, like DroneShield Limited (DRO). Others, like the Global X Defense Tech ETF (SHLD) and the Invesco Aerospace & Defense ETF (PPA) can help layer in more exposure.
SHLD charges a 50 bps fee to track the Global X Defense Tech Index. SHLD’s modified, market cap-weighted index includes pure play defense names benefiting from rising global conflict. It includes firms in areas like big data, augmented reality, robotics, cybersecurity, and fuel systems. That has helped SHLD return 23.38% over the last three months per ETF Database data.
PPA, meanwhile, charges 58 bps to track the SPADE Defense index. Like SHLD, it targets major industry leaders like Lockheed Martin Corp. (LMT). PPA has returned 19.95% over the last three months.
PPA’s exposure to drones, like SHLD’s would come from overlap with existing industry leaders, rather than from pureplay names. Investors have options from DRNZ’s tight focus to PPA and SHLD for an uncertain and increasingly conflict-ridden world.
Originally published on ETF Trends
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VettaFi LLC (“VettaFi”) is the index provider for DRNZ for which it receives an index licensing fee. However, DRNZ is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of DRNZ.
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