War Drums: Three Top Defense ETFs as Tensions Boil with Iran

Minutes before attacking Iran, President Trump changed his mind in June 2019.

“We were cocked & loaded to retaliate last night on 3 different sights when I asked, how many will die. 150 people, sir, was the answer from a General. 10 minutes before the strike I stopped it,” Trump tweeted.  “[N]ot proportionate to shooting down an unmanned drone.”

Instead, the U.S. launched cyberattacks, targeting Iranian computer systems that controlled its rocket and missile launchers. While little is known about the scope of that attack, such cyber warfare could mark a new front in escalating tensions with Iran.

In January 2020, the cycle repeated itself. Citing provocation from Iran, Trump ordered a drone strike, killing Iranian QUD Forces General Soleimani. Iran vowed extreme revenge, and countered with a limited missile attack. Markets plunged briefly on this news event.

Sanctions on Iran

Shortly after the June event, President Trump signed an executive order imposing “hard-hitting new sanctions on Iran in response to the downing of an unmanned U.S. drone.  “We will continue to increase pressure on Iran until the regime abandons its dangerous activities,” which includes its nuclear ambitions, said Trump, as quoted by CNBC.“I can only tell you we cannot ever let Iran have a nuclear weapon.”

President Trump’s then threatened to “obliterate” Iran should they attack “anything American.” 

In fact, he tweeted, “Iran’s very ignorant and insulting statement put out today only shows they do not understand reality. Any attack by Iran or anything American will be met with great and overwhelming forces. In some areas, overwhelming will mean obliteration.”

And just recently, Trump vowed to impose new, tougher sanctions against Iran if hostilities escalate.

Should Iran and the U.S. inch closer to war, investors will pay close attention to defense ETFs.

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Three Top Defense ETFs

SPDR S&P Aerospace & Defense ETF (XAR)

The SPDR S&P Aerospace & Defense ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Aerospace & Defense Select Industry Index. It has holdings in Axon Enterprise Inc., Textron Inc., and Orbital ATK Inc. for example.

iShares U.S. Aerospace & Defense ETF (ITA)

The iShares US Aerospace & Defense ETF invests in stocks in the domestic aerospace and defense sector. These stocks can include companies that manufacture both commercial and military aircraft as well as other types of defense-related equipment. It has holdings in Boeing, United Technologies Corporation, Lockheed Martin, Raytheon, General Dynamics, and Northrop Grumman for example.

Power Shares Aerospace & Defense ETF (PPA)

The Invesco Aerospace & Defense ETF tracks a market-cap-weighted index of US-listed stocks involved in the defense, military, homeland security and space industries. It has holdings in Boeing, United Technologies, Honeywell International, Raytheon, and General Dynamics.

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