Defense stocks around the world surged to record highs on Monday as investors digested the U.S. military intervention in Venezuela and its implications for global security spending. The coordinated rally stretched from Asian markets through European trading and into the U.S. session, signaling a decisive shift in how markets are pricing geopolitical risk.

In Japan, defense contractors led the Nikkei 225 to new highs. South Korea's defense exporters posted their best day in months. In the United States, the iShares U.S. Aerospace & Defense ETF (ITA) added approximately 2% to reach an all-time intraday record, extending a year in which the fund gained more than 52%.

The Venezuela Catalyst

The weekend's dramatic U.S. military operation—which resulted in the capture of Venezuelan President Nicolas Maduro and the effective collapse of his government—represents the most significant American military action in the Western Hemisphere since the 1989 Panama invasion.

For defense investors, the operation's success carries several bullish implications:

  • Demonstrated U.S. capability: The swift, decisive action reinforces American military supremacy and validates continued investment in defense technology.
  • Geopolitical uncertainty: Any major military action raises questions about what comes next, encouraging governments worldwide to boost defense spending.
  • Bipartisan support: Military interventions that are perceived as successful typically enjoy broad political support, reducing the risk of defense budget cuts.
  • Technology showcase: Modern military operations highlight advanced capabilities that drive demand for new systems and upgrades.

Analysts noted that while the direct economic impact of Venezuela itself is modest, the demonstration effect on global defense spending could be substantial.

Asia's Defense Surge

Asian defense stocks led the global rally, reflecting both the region's proximity to other geopolitical hotspots and its growing defense export industries.

In Japan, Mitsubishi Heavy Industries—the nation's largest defense contractor—rose sharply as investors anticipated accelerated spending under Japan's expanded defense budget. The company has been a primary beneficiary of Tokyo's historic shift away from pacifist defense policies.

South Korean defense names including Hanwha Aerospace and Korea Aerospace Industries posted strong gains. South Korea has emerged as a major defense exporter, winning contracts in Poland, Australia, and the Middle East. The Venezuela action reinforces the value of allied relationships and modern military capability.

"Demonstrations of US military power have already boosted aerospace and defense companies for 2025, and 2026 should see substantial new contract bid opportunities," noted analysts at 24/7 Wall Street. "Therefore, aerospace and defense ETFs may be worth watching."

U.S. Defense ETFs at Record Highs

The U.S. defense sector has been on a tear. The iShares U.S. Aerospace & Defense ETF (ITA), the largest fund focused on the sector with $12.4 billion in assets, gained 52.68% in 2025. The GlobalX Defense Tech ETF (SHLD) performed even better, surging 78.39%. The SPDR S&P Aerospace and Defense ETF (XAR) added 51.78%.

Monday's gains extended those advances. Key holdings across these ETFs rose broadly:

  • Lockheed Martin: The world's largest defense contractor gained on expectations for accelerated procurement of fighter jets and missile systems.
  • Northrop Grumman: Strength in the B-21 bomber program and space systems drove shares higher.
  • RTX (formerly Raytheon): Missile defense systems remain in high demand amid elevated geopolitical tensions.
  • L3Harris Technologies: Communications and intelligence systems saw renewed interest following the Venezuela operation.

The $1 Trillion Defense Budget

Monday's rally comes against the backdrop of the United States' first-ever trillion-dollar defense budget. President Trump's proposed fiscal 2026 defense budget of $1.01 trillion represents a 13.4% increase from the previous year—a rate of growth that seemed unimaginable just a few years ago.

The budget increase reflects bipartisan consensus that the U.S. must invest more heavily in defense amid rising threats from China, Russia, and now, as demonstrated, instability in the Western Hemisphere. Key spending priorities include:

  • Pacific deterrence: Naval and air capabilities focused on the Taiwan Strait and South China Sea.
  • Nuclear modernization: Upgrades to aging missile, bomber, and submarine forces.
  • Space systems: Satellite constellations and anti-satellite capabilities.
  • Emerging technologies: Artificial intelligence, autonomous systems, and hypersonic weapons.

Global Defense Spending Accelerates

U.S. spending increases are mirrored worldwide. NATO allies continue ramping up defense budgets to meet the 2% of GDP target that many had previously ignored. Asian allies including Japan, South Korea, and Australia are on multi-year spending trajectories.

According to the Stockholm International Peace Research Institute, global military expenditure exceeded $2.4 trillion in 2025—a record high. That figure is expected to climb further in 2026 as governments respond to an increasingly uncertain security environment.

For defense contractors, this translates directly to revenue growth. Order backlogs at major defense primes are at multi-year highs, providing visibility into years of future production.

The Investment Case

Defense stocks present an unusual investment proposition. They benefit from government spending that's relatively insulated from economic cycles, providing defensive characteristics during downturns. Yet they also offer growth potential as geopolitical tensions drive budget increases.

Current valuations reflect this dual appeal. Defense stocks trade at premiums to the broader market, but those premiums appear justified given the spending outlook and competitive moats that make it extremely difficult for new entrants to compete.

Risks remain, including potential cost overruns on major programs, political shifts that could affect procurement priorities, and execution challenges on next-generation weapons systems. But for now, the momentum is clearly bullish.

The Bottom Line

The Venezuela intervention has catalyzed a global defense stock rally that reflects deeper forces: rising geopolitical tensions, expanding military budgets, and investor appetite for exposure to companies whose revenues are backed by government commitments. From Tokyo to Seoul to New York, defense is having a moment—and with a trillion-dollar U.S. defense budget now reality, that moment may have years to run.