Future of Defence Report | July 2026

Defence ETF, European Defence ETF, and Indo-Pacific Defence ETF – Key Takeaways

NATO Summit 2026 – NATO leaders gathered in Ankara, Turkey for a two-day summit with many items on the agenda.  NATO secretary general Mark Rutte called for NATO members to present “clear, concrete, and credible” plans to achieve the new NATO 5% of GDP spending target. NATO members unveiled tens of billions in new arms contracts at an industry forum on the sidelines of the summit, as they attempt to show the US that they are delivering on defence spending pledges. Ahead of the summit, President Trump posted a graphic showing NATO member defence budgets relative to the vast US spend of $999 billion in 2026.  Besides more collective spending, other topics of contention include the fate of Greenland, with the US still threatening to take control from NATO member Denmark, the lack of NATO assistance in the conflict against Iran (specifically Britain, France, Spain, and Italy), and the ongoing commitment to the Article 5 mutual defence clause. Trump also slammed Spain for not contributing enough to NATO saying, “Spain is a terrible partner in NATO. They don’t participate. They don’t pay. I don’t want anything to do with Spain. Cut off all trade with Spain, please, including visits.”[1] [2]

Shift to NATO 3.0 Phase- The NATO Summit was heavily focused on transitioning from set theoretical targets (2.0) to delivering actual results.  A summary of key developments include:

Progress on 5% of GDP Target: After last year’s setting of the new 5% of GDP target, just one year into the 10-year project, total defence and security spending across the alliance has already reached an average of roughly 4%. European allies and Canada are actively assuming a much larger share of financial and security responsibilities, a shift highly praised by Secretary General Mark Rutte to satisfy ongoing U.S. demands for equitable burden sharing.

Financial Commitments Announced: Governments and private defence sectors announced over €50 billion in new procurement contracts. “NATO’s Drone Edge”, a new major initiative was launched to invest $40 billion into uncrewed systems (drones) over the next five years. A €27 billion investment was approved to modernize NATO’s existing fuel storage and pipeline infrastructure, aggressively expanding distribution networks toward the alliance’s eastern flank to improve warfighting readiness.

Continued Support for Ukraine: Despite the geopolitical balancing act of the host nation, Turkey, the alliance issued a unified stance on Eastern Europe with allies pledging to provide at least €70 billion in military equipment, assistance, and training to Ukraine over the course of this year. Trump also gave Ukraine leader Zelensky hope that Ukraine may be allowed to produce Patriot missile interceptors to help defend themselves from Russian attacks.[3] [4]

$50 Billion in Arms Deals – NATO officials ​touted more than $50 billion in defence procurement and industrial agreements as allies sought to demonstrate their commitment to bolstering military spending. Major contract recipients included:

SAAB – Swedish defence equipment maker said NATO will begin formal negotiations ⁠on the acquisition of up to 10 GlobalEye airborne early warning and control aircraft. Saab could start deliveries as soon as 2030, and the final price would ​be roughly $400 million to $450 million per aircraft.

LOCKHEED MARTIN & RHEINMETAL – Lockheed Martin and Rheinmetall signed a memorandum of understanding to jointly produce ATACMS missiles in Germany, a move that would mark the first manufacture of the short-range ​ballistic missile outside the US. Separately, the US will establish a maintenance facility in Europe for Lockheed Martin’s ​advanced PAC-3 air defence missile, and a European manufacturing facility is also a possibility. Finally, the UK will spend $254 million on Lockheed Martin’s long-range Precision Strike Missiles (PrSM), with the first deliveries expected in 2027. The UK could join current programme partners ​Australia and the U.S. ​to further develop the ⁠missile.

NORTHROP GRUMMAN – NATO will buy up to five Northrop Grumman MQ-4C Triton high-altitude surveillance drones, with Norway, Finland, Germany and ​Denmark signing a letter of intent for the purchase.

AIRBUS – NATO will launch a strategic ​airlift fleet of ⁠Airbus (AIR.PA), opens new tab A400M transport planes and expand its A330 MRTT tanker fleet by one aircraft.

ISAR AEROSPACE – German rocket maker Isar Aerospace signed a contract with Canada’s Maritime Launch Services to build ⁠and ​use a dedicated launch pad for its Spectrum rocket at ​Spaceport Nova Scotia, eastern Canada.

ACCENTURE, LEONARDO – IT consulting firm Accenture and Italian defence company Leonardo signed a seven-year contract worth about 200 million ​euros to design and operate a secure NATO communications network.[5]

Indo-Pacific Defence News

Asia’s Defence Export Boom – Asia, once a big arms importer, is now emerging as a hardware manufacturer and arms exporter, becoming an important player in the global defence supply chain. Bolstered by domestic powerhouses like Hanwha Aerospace and Korea Aerospace Industries, South Korea has become a premier arms supplier. Rather than just exporting whole systems – such as the massive K9 howitzer sales – Korean firms are utilising offset agreements and networking events with entities like the Defence Acquisition Program Administration to integrate small domestic suppliers directly into supply chains of Western primes like Boeing and Lockheed Martin. Following Tokyo’s policy shift allowing the export of lethal weaponry, Japan has moved aggressively to establish itself as a strategic heavyweight. This has culminated in a massive $6.5 billion agreement for Mitsubishi Heavy Industries to supply new Mogami-class frigates to Australia. Regional powers are also deepening their cooperation to avoid reliance on traditional Western logistics. For instance, the Philippines and Vietnam are actively substituting their traditional or disrupted supply pipelines with maintenance, logistics, and hardware partnerships from South Korea, Turkey, and India.  Finally, the US is pivoting to co-production in the region, building massive weapons manufacturing complexes and integrating allied Indo-Pacific shipyards into both U.S. defence and commercial vessel programs.[6]

Indonesia Drops KF-21 Co-Production Plan – Plans to manufacture South Korean KF-21 in Indonesia will not materialise.  The KF-21 Boramae, developed by Korea Aerospace Industries, is a twin-engine fighter designed to succeed South Korea’s aging F-4 and F-5 fleets. Indonesia intended to use these jets to replace older warplanes. Jakarta had initially agreed to cover 20% of the development cost, then priced at 1.6 trillion won ($1.3 billion), to be paid until 2026. But the agreement had been bogged down by delayed payments and allegations of sensitive data theft, which were carried into numerous renegotiations on cost-sharing arrangements. While purchasing the KF-21 jets is still possible, the odds are in favour of existing contractors with more attractive tech transfer terms. Officials are reportedly considering the purchase of 24 additional French Dassault Rafale jets to supplement the 42 jets the government ordered under a contract signed in 2022. Indonesia also signed in April an overseas loan scheme to buy 48 KAAN stealth jets from Turkish Aerospace Industries worth $10 billion, which will be delivered beginning in 2032. These issues amplify the difficulty of technology transfer, despite the desire for domestic production.[7]

Company News – Earnings Analysis (NATO)

NATO July

Company News – Earnings Analysis (NATE)

NATE July

Company News – Earnings Analysis (ARMY)

ARMY July

Company News – Earnings Analysis (QUAD)

QUAD July

Source: VettaFi as of 07.07.2026. For illustrative purposes only.

NATO 28-04-2026

NATE 28-04-2026

NATE July 2

ARMY 28-04-2026

ARMY July 2

QUAD 28-04-2026

QUAD July 2

Source: VettaFi. As of 28.04.2026. For illustrative purposes only.

Macro Outlook – Short-term trade belies continued long-term opportunity

One of the main goals of the July NATO Summit in Turkey was to demonstrate unity of purpose and tangible progress on spending goals. NATO is now at 4% of GDP, only one year into the decade 5% of GDP goal and $50 billion in new contracts were announced at the Summit.  But clearly NATO-US relations remain strained under a Trump Administration with Trump still threatening Greenland, bitter about Iran, and attacking Spain’s level of commitment. While Trump did praise the progress being made toward achieving NATO’s new spending target, he also emphasised that the US is still the largest contributor to NATO on an absolute basis. But Trump also highlighted that a significant portion of the increased defence budgets of European countries would be directed toward systems procured from the US defence industry, underlining the growing demand for the Patriot Air and Missile Defence System, Tomahawk cruise missiles, and other advanced US-made defence systems. So European NATO members are spending, but much of the spending is also benefiting US contractors. While manufacturing autonomy is a goal for both Europe and Asia, the path to technology transfer is often through joint partnerships and collaboration as opposed to going it alone. The manufacturing economies of Asia, such as South Korea and Japan are particularly well positioned to benefit in this scenario.[8]

Key Charts in Focus

Source: Statista. Data as of 28.04.2025. For illustrative purposes only.

defence july 2

Source: SIPRI. Data as of April 2026. For illustrative purposes only.

defence july 3

Data as of 23.04.2026. Past performance is not indicative of future performance. For illustrative purposes only.

defence july 4

Data as of 23.04.2026. For illustrative purposes only.

Data as of 23.04.2026. For illustrative purposes only.

Defence ETF Performance
As of 31.07.2026

NATO (Fund)NATONTR (Index)
1M2.83%2.90%
3M9.16%9.29%
6M2.41%2.61%
YTD13.35%13.64%
12M15.89%16.40%
3Y160.78%164.85%
Since Inception (03/07/2023)168.79%172.91%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31.07.2026

Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.

European Defence ETF Performance
As of 31.07.2026

ARMY (Fund)ARMYSN (Index)
1M8.62%8.70%
3M4.27%4.28%
6M-3.56%-3.45%
YTD10.57%10.82%
12M8.89%8.96%
3Y-227.09%
Since Inception (07/04/2025)42.88%47.85%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31.07.2026

Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.

Please note that performance for the Indo-Pacific Defence ETF is not yet available to show due to the age of the funds.

[1] https://www.theguardian.com/world/2026/jul/07/nato-braces-for-difficult-summit-as-trump-puts-pressure-on-spending

[2] https://www.cnbc.com/2026/07/08/trump-spain-nato-trade-summit.html

[3] https://nato.int/en/news-and-events/events/transcripts/2026/07/08/press-conference-by-nato-secretary-general-mark-rutte-following-the-meeting-of-heads-of-state-and-government-at-the-2026-nato-summit-in-ankara

[4] https://www.theguardian.com/world/2026/jul/08/trump-zelenskyy-vague-promise-licence-manufacture-patriot-missiles

[5] https://www.reuters.com/business/autos-transportation/defence-companies-sign-deals-nato-industry-forum-2026-07-07/

[6] https://finance.yahoo.com/economy/policy/articles/asia-defense-boom-rewiring-global-210000278.html

[7] https://www.defensenews.com/global/asia-pacific/2026/07/06/indonesia-drops-kf-21-co-production-plans-eying-stock-warplanes-instead/

[8] Source: VettaFi

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