Want To Benefit From The U.S. Iran War?
Consider This Defense/Tech ETF For Your Portfolio
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Current Price: $76.66
Yield: 0.48%
Unless you’ve been living under a rock, you’re likely aware of the ongoing conflict with Iran. There have been rumors that the war could end soon, but the reality is that no one truly knows when the situation will resolve.
What we do know is that the longer the conflict persists, the more likely we are to see increased market volatility. Historically, wars tend to be inflationary events. If inflation begins to rise again, it could reduce the probability of the Federal Reserve cutting interest rates this year.
Moreover, prolonged geopolitical instability could also increase the chances of the U.S. economy slipping into a recession. In recent weeks, markets have already begun to show signs of increased volatility, which suggests investors may be starting to price in a potential economic slowdown.
However, like any market downturn, volatility often creates opportunity.
In this article, I discuss the fundamentals of the Global X Defense Tech ETF (SHLD) and why, despite my hold rating, the ETF may still be worth considering for long-term investors.
Who Is SHLD? 🚨
To understand why SHLD may be attractive today, it’s important to understand what the fund actually does.
The Global X Defense Tech ETF focuses on companies involved in defense technology, cybersecurity, and advanced military systems. These businesses design and manufacture products such as drones, robotics, missile systems, radar technology, aircraft, and naval defense systems.
As a 21-year U.S. Navy veteran, I’m personally very familiar with many of the companies inside the ETF.
Several of SHLD’s top holdings include major defense contractors such as:
Huntington Ingalls Industries (HII) — Builder and maintainer of U.S. Navy warships
Northrop Grumman (NOC) — Aerospace, missile defense, and radar systems
Lockheed Martin (LMT) — Advanced military aircraft and defense systems
RTX Corporation (RTX) — Missiles, aerospace, and defense electronics
Palantir Technologies (PLTR) — AI-driven data analytics and defense software
BAE Systems (BAE) — Global defense and security contractor
L3Harris Technologies (LHX) — Communications, radar, and surveillance systems
The ETF currently holds 49 companies, down from 55 following its most recent semi-annual rebalance. SHLD rebalances its portfolio twice a year in May and November, and companies must have a minimum market cap of $200 million to be included.
SHLD tracks the Global X Defense Tech Index, with its largest sector exposures being:
Industrials (XLI)
Technology (XLK)
Additionally, the fund provides some international diversification with holdings outside the United States.
Strong Outperformance Since Inception 📉
Defense stocks have been one of the market’s strongest performers in recent years, largely due to rising global military spending.
Since the launch of SHLD on September 11, 2023, the ETF has delivered impressive returns.
From inception through the end of 2024:
SHLD total return: 52.44%
VOO total return: 33.53%
That level of outperformance has continued.
In 2025, SHLD significantly outpaced the broader market, rising nearly 75%, more than four times the return of Vanguard’s S&P 500 ETF (VOO).
So far in 2026, the trend has remained intact.
SHLD: Up roughly 16%
S&P 500 (SP500): Down year-to-date
While past performance never guarantees future returns, the macro backdrop suggests that defense-focused investments could remain strong performers going forward.
Rising Global Defense Spending 💸
One of the biggest catalysts for SHLD has been the rapid increase in global defense spending.
In 2025, global defense budgets rose 2.5% to $2.4 trillion.
For 2026, spending is expected to reach roughly $2.6 trillion, and that number could increase further if geopolitical tensions persist.
Defense spending has also received strong political support in the United States. For example, the administration has discussed building a “Golden Dome” missile defense system, which could be completed within the next three years.
Projects like this require significant investment in:
missile defense systems
AI-powered defense technology
advanced radar and surveillance
cybersecurity infrastructure
Many of SHLD’s holdings sit directly at the center of these initiatives.
Net Asset Value Growth ↗️
Another key driver of SHLD’s performance has been its strong NAV growth.
Over the past year, the ETF’s net asset value has surged nearly 92%, reflecting the strong earnings growth among its underlying companies.
In the past 1 and 3 months alone, SHLD has delivered double-digit NAV growth.
This suggests that the ETF’s performance has not been purely speculative but has been supported by strong fundamentals.
Distributions & Expense Ratio 💵
Despite its strong performance, SHLD does have a few drawbacks investors should be aware of.
First, the ETF distributes income semi-annually, rather than quarterly like most ETFs.
Second, the expense ratio is 0.50%, which is relatively high for a passively managed fund. That means investors pay $50 annually for every $10,000 invested.
Personally, I generally prefer passive ETFs with expense ratios closer to 0.25% or lower.
Lastly, SHLD’s distributions are taxed as ordinary income, making the ETF better suited for tax-advantaged accounts such as a Roth IRA.
However, most investors considering SHLD are likely prioritizing capital appreciation rather than income.
The good news is that distributions have grown significantly.
Last year, SHLD’s distribution increased 79.2%, rising from $0.1986 in 2024.
AI Could Become A Major Catalyst 🧑🏾💻
Another long-term catalyst for SHLD is the rapid adoption of artificial intelligence.
Many defense contractors are heavily investing in AI applications, including:
autonomous drones
battlefield data analytics
predictive defense systems
cybersecurity
advanced surveillance
According to industry forecasts, the global AI market could. exceed $2 trillion by 2034.
Even though Industrials make up the largest sector exposure within SHLD, many of its holdings are deeply integrated into the rapidly growing AI ecosystem.
This gives the ETF another powerful tailwind beyond defense spending alone.
Risks To Consider ⚠️
While SHLD has delivered strong returns, investors should still be mindful of several risks.
First, the ETF is relatively new, with less than three years of operating history.
Second, the fund has experienced parabolic price appreciation, rising roughly 66% over the past year. If market sentiment shifts, the ETF could experience a meaningful correction.
Finally, if geopolitical tensions escalate into a broader economic downturn or recession, defense stocks could still experience short-term volatility.
Bottom Line ✅
Whether the war with Iran ends soon or continues for longer than expected, global defense spending appears likely to remain elevated.
Between rising military budgets, rapid AI adoption, and continued geopolitical uncertainty, companies involved in defense technology may continue to see strong demand.
For investors seeking exposure to these trends, the Global X Defense Tech ETF (SHLD) provides diversified access to some of the world’s leading defense and technology companies.
While I currently maintain a hold rating, SHLD could still be worth considering for investors looking for long-term growth tied to defense spending and artificial intelligence innovation.
Would SHLD make the cut for your portfolio? Let me know in the comments.
Happy Investing!
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Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
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