An unfortunate reality facing the world in 2026 is rising geopolitical risk. The year kicked off with a U.S. attack on Venezuela, with the Russian war in Ukraine entering a fifth calendar year. What’s more, risks continue to abound around Taiwan, conflicts simmer in central Africa and southeast Asia, and tensions are rising around the Middle East. Investors and advisors, then, may want to consider how defense ETF options can help them respond.
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Defense ETF offerings could help investors offset volatility from those wide-ranging geopolitical risks. Rather than trying to react quickly to shifting energy prices driven by geopolitics, for example, defense ETF strategies like ARKX and UFO offer tech exposure and long-term upside.
ARKX, the ARK Space & Defense Innovation ETF, actively invests in companies focused on orbital and suborbital aerospace. For a 75-basis-point (bps) fee, it targets segments enabling space development, such as robotics, AI, 3D printing, and more. That hyper-focused allocation has helped the defense ETF return 18.96% over the last three months, according to ETF Database data. It has done so with exposure to big names like L3Harris Technologies (LHX).
UFO, the Procure Space ETF, presents a different option. The strategy also charges 75 bps and tracks the S-Network Space Index. The tier-weighted index of space and defense firms includes satellite-based consumer products and services, space technology hardware, space-based imagery and intelligence services, and more.
That has helped UFO outperform ARKX. The strategy has returned 38.3% over the last three months. What’s more, the fund has outperformed its peer strategy over the last one-year period, returning 74.8% in that time. UFO has done so by investing in names like PlanetLabs PLC (PL), a satellite imagery and intelligence firm, as its largest weighting.
Looking to the rest of the year, a defense ETF allocation could prove a savvy investment. UFO and ARKX provide passive and active views, respectively, that may merit consideration.
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