Abstract
Financial markets have traditionally relied on assets such as gold to protect investment portfolios during periods of uncertainty. However, prolonged geopolitical conflicts create economic conditions that affect industries in fundamentally different ways, raising the possibility that certain sector-specific investments may also exhibit defensive characteristics. This paper investigates whether the iShares US Aerospace & Defence ETF (ITA) exhibits safe-haven behaviour during the Russia-Ukraine war, offering an alternative perspective on conventional safe-haven assets and war profit-making. The results indicate that ITA did not meet all the criteria for a conventional safe-haven. Nevertheless, it displayed greater resilience than the broader equity market, maintaining comparatively stable volatility and delivering substantially stronger investment performance, while remaining positively associated with the market. These findings suggest that safe-haven behaviour may arise through two distinct mechanisms. Traditional safe havens, such as gold, derive their protective role from flight-to-quality behaviour. In contrast, defence-sector investments may provide resilience because the underlying geopolitical shock strengthens their economic fundamentals by boosting government defence spending and improving earnings expectations.
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Recommended Citation
Sharma, Nikita
(2026)
"War Profits or Safe Havens? Defence ETFs During the Russia-Ukraine Conflict,"
Critical Letters in Economics & Finance:
Vol. 3:
Iss.
1, Article 3.
Available at:
https://arrow.tudublin.ie/clef/vol3/iss1/3