In a year marked by escalating geopolitical tensions and shifting global alliances, the Themes Transatlantic Defense ETF (NATO) has surged 35% while U.S. stocks, as measured by the S&P 500, have gained roughly 2%.
The fund’s performance comes amid renewed hostilities in the Russia-Ukraine conflict and fresh uncertainty about the future of NATO itself following President Donald Trump’s sharp criticisms of the alliance.
These dynamics have triggered a wave of increased defense spending across Europe, fueling investor demand for companies tied to military production, surveillance systems and advanced weaponry.
The most recent catalyst: a memorandum from Russia laying out aggressive conditions for ending the war, further rattling markets and boosting defense-focused equities.
The Themes Transatlantic Defense ETF is designed to give investors targeted exposure to defense and aerospace companies headquartered in countries that are members of the North Atlantic Treaty Organization (NATO).
To achieve its objective, the fund tracks the Themes NATO Defense Index, which includes firms involved in weapons manufacturing, military communications, cybersecurity, aerospace systems and battlefield logistics across both the U.S. and Europe.
Since NATO tracks a market cap-weighted index, the top holdings include major U.S. names like GE Aerospace (GE) and Boeing (BA), alongside European giants like Airbus AE. The ETF’s strategy reflects a transatlantic alignment, making it unique compared to more U.S.-centric or Europe-only defense ETFs.
With rising defense budgets, particularly among Germany, Poland and the Nordic countries, the fund has benefited from strong investor interest and real-world increases in defense contracts.
But will global and European defense ETFs keep climbing?
Beyond NATO, other ETFs focused on European defense stocks have also attracted attention in 2025.
The iShares European Defense ETF (EUAD) provides exposure to pure-play European defense firms and excludes U.S. companies. It targets manufacturers and suppliers within the EU and U.K. that derive significant revenue from defense activities. EUAD offers a tighter regional focus than NATO, making it more sensitive to European policy changes and spending trends.
EUAD leads all ETFs in this group, as it’s up nearly 70% year to date.
The SPDR European Shield ETF (SHLD) blends defense and homeland security exposure, including worldwide companies that work in border protection, drone surveillance and cyber-defense. Its portfolio tilts slightly more toward tech-enabled security and infrastructure resilience, making it a broader play on European and global national security than strictly military hardware.