Investors are no strangers to weathering political and financial upheavals, yet even the most experienced are finding it hard to overlook the recent series of monumental global events.

The situation escalated when the United States launched a military operation in Venezuela, leading to the capture of President Nicolas Maduro. Following this, US President Donald Trump issued a string of provocative statements concerning Greenland—which is part of Denmark, a NATO ally—as well as Cuba, Colombia, Iran, and Mexico.

Memories of his previous threats directed at Panama and Canada linger on as well.

In such unsettling times, one certainty is that Trump’s confrontational stance towards both adversaries and allies is likely to accelerate rearmament initiatives across Europe.

Trump has revealed a colossal increase in US defense expenditure, raising it by over 50% to an annual $1.5 trillion (£1.1 trillion), with potential allocations for European suppliers. He has also called for restrictions on executive compensation, dividends, and stock buybacks at US defense firms. While these measures may be challenging to implement, they could make European defense companies more appealing to investors.

Simultaneously, UK Prime Minister Keir Starmer and French President Emmanuel Macron have reaffirmed their readiness to deploy troops to Ukraine. This move is part of a peace and security strategy aimed at thwarting any potential Russian invasion.

Elsewhere in the world, tensions worsened in Asia as China banned exports of goods to Japan that could have military uses.

Amid these tectonic shifts, investors will be wondering how to protect themselves. And they’ll be looking for opportunities, too.

Unsurprisingly, defence stocks that soared in the first year of Trump’s unpredictable second term leapt in value again last week. Investing giant Hargreaves Lansdown reports that aerospace and defence trades on its online platform were three times as high on Monday as on the average trading day in December 2025.

But experts believe defence stocks have much further to run.

We look at which have already done well and the ones that experts suggest will continue to thrive as global tensions mount.

BAE Systems (annual gain 64 per cent)

Defence firms are a ‘buy’ across the board in the City, but analysts say the pressure is now on to deliver the massive order books they have built and grow earnings.

So although the consensus view is positive, there is going to be more scrutiny over revenues, profits and the strength of forward orders when companies report, while headlines about peace deals may trigger short-term dips in the sector.

That said, Sam North, a market analyst at investment company eToro, reckons the next leg of growth is likely to favour national heavy hitters – which means BAE Systems in the UK and the German giant Rheinmetall.

In a world where the US steps back from providing European security, he believes that BAE becomes the UK Government’s ‘default insurance policy’ – a safe pair of hands that should continue to perform when spending more is unavoidable. He adds: ‘The reality is that Western ammunition stockpiles are depleted and will take years to rebuild.

‘Trump’s rhetoric is effectively forcing European governments into panic-buying their own security, which translates into guaranteed long-term contracts for the companies building the tanks, ships and ammunition.’

Garry White, chief investment commentator at wealth manager Charles Stanley, also reckons that BAE is likely to gain from Trump’s recent escalation, as it is the UK’s defence heavyweight and a bellwether for military procurement.

He says it has a £75billion order backlog in a portfolio spanning air, land, sea and cyber. Nato’s spending push will underpin demand for its flagship programmes, such as Typhoon jets, Type 26 frigates and Dreadnought submarines.

Both White and Interactive Investor’s head of markets, Richard Hunter, note BAE’s progressive dividend policy – it’s annual award to shareholders has been increased for 18 years in a row.

Hunter adds that BAE’s order book is up an annual 11 per cent to a record level, while the £4.4billion purchase of US company Ball Aerospace has widened its product portfolio in the space sector.

However, Hargreaves Lansdown equity analyst Aarin Chiekrie sounds a note of caution on BAE, which gets 45 per cent of its sales from the US and has been a big beneficiary of its mammoth defence budget. He says: ‘After a strong share price performance in 2025, the group’s valuation now reflects its strength.

‘But with European countries looking to play catch-up after a prolonged period of underinvestment in defence, other more Continent-focused companies look better positioned for growth in the coming years.’

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Rolls-Royce (annual gain 118 per cent)

A standout performer in the sector, Rolls-Royce seems to get blanket good reviews from investment experts.

North of eToro says: ‘Once an unloved company, it has since addressed long-standing engine issues, repaired its balance sheet, and delivered a remarkable gain of more than 1,000 per cent in the past three years.’

Rolls-Royce is now ‘firing on all cylinders’, according to Richard Hunter of Interactive Investor.

He adds: ‘Quite apart from its exposure to military defence products, which has lately come into sharp focus, the group’s civil aerospace unit, which accounts for half of group revenue, is paid on flying hours for its engines, which now exceed pre-pandemic levels.’

Chiekrie also speaks approvingly of Rolls-Royce cashing in on the rebound in long-haul travel, while on the smaller defence side of its business the order backlog is at a healthy £18.8billion – or about four years’ work.

Again though, he is wary about the future, because a lot of the ‘easy work’ such as contract renegotiations and efficiency improvements is now done.

‘The valuation looks to reflect the strong market position that Rolls-Royce holds, so expect share price performance to temper in the near term,’ he says.

Babcock (annual gain 182 per cent)

A major naval supplier, Babcock is thought to be well positioned to continue making gains as the UK and other countries boost their defence budgets.

About 62 per cent of group revenue is derived from UK defence, and higher spending on the civil and defence nuclear budget is of particular interest, says Hunter.

‘Nuclear accounts for 37 per cent of group revenue and is Babcock’s largest unit, with its expertise in submarines also reaching over to its marine business, which is the second largest revenue driver responsible for a third of sales.’

Hunter says the immediate outlook for Babcock is assured, with a contract backlog of £10.4billion, and that the group is looking closely into bolt-on acquisitions.

Chemring (annual gain 50 per cent)

More of a niche player, Chemring is nonetheless an appealing one considering its highly sought-after specialist products.

‘The company produces countermeasures, flares and decoys that protect jets from missiles – essential equipment in an increasingly dangerous world,’ says North.

Its electronic warfare technology, space actuators and biological defence systems are critical for Nato and allied forces, adds White.

A record £1.3billion order book and management that is aiming to double sales to £1billion by 2030 has caught the eye of overseas buyers.

Hunter says: ‘The group could be seen as a tasty morsel rather than a main meal – BAE Systems has a market capitalisation of £56billion and Rolls-Royce £105billion.’

By contrast Chemring has a market capitalisation of £1.4billion.

QinetiQ (annual gain 17 per cent)

The cutting-edge nature of many of Qinetiq’s products means this company has been dubbed the ‘James Bond stock’, says Hunter.

He adds: ‘Among its recent announcements, it noted it had agreed a contract for its Light-­Applique Armour Systems Technology with the US Army’s Future Long-Range Assault Aircraft programme, and that its tethered aerostat radar system had grown its company contract value by 10 per cent. It also won two further framework contracts with US national security customers.’

In Europe… Thales, Rheinmetall and Airbus

Vehicle and ammunition sales helped Rheinmetall’s shares to soar last year, and it will be bolstered by Europe’s need to rebuild its arms, according to Chiekrie.

The German defence company now has lofty ambitions to grow sales five times from 2024’s level to €50billion (£43billion) by 2030, by expanding its product offering and taking a chunk of Germany’s higher defence spending, he says.

White adds: ‘France’s Thales is a leader in electronics, radar and cybersecurity. Rising European autonomy efforts mean greater investment in areas where Thales excels, bolstered by acquisitions such as Imperva to strengthen its cyber offering.’

He adds that Airbus should benefit from increased demand for military transport aircraft as Europe seeks strategic independence.

Time to invest in Venezuela? Probably not…

While the world has watched in awe the capture of Venezuelan president Nicolas Maduro, investors have been wondering whether it spells opportunity, writes Holly Mead.

Maduro has been indicted for alleged involvement in ‘narco-terrorism’ networks, and US President Donald Trump has installed Maduro’s vice-president, Delcy Rodriguez, as Venezuela’s interim president, promising to oversee the rebuilding of the country, its economy and – crucially – its oil industry.

For brave investors, times of turmoil can often be the perfect time to buy. But while Venezuela’s IBC stock market index shot up 50 per cent in a single day last week, investing in the country is not easy and, experts warn, may not bring long-term rewards.

Since the early 2000s, national output has fallen 80 per cent. Inflation is above 100 per cent a year, and the country relies on imports for 60 per cent of its food. In 2017, sanctions were imposed by the US, UK and EU, blocking its access to financial markets. Anthony Simond at Aberdeen Investments says the country needs to complete a debt restructuring, but this cannot happen until sanctions are eased.

This would allow the government to issue debt to foreign investors to raise money for much-needed infrastructure investment.

‘While a restructuring is very unlikely in 2026, we think the market will begin to price in a more optimistic scenario on progress for an eventual restructuring,’ says Simond. That could mean valuations on bonds issued by the Venezuelan government start to improve.

Currently you can buy a bond worth $1 for 35 cents, Simond says, with the bonus of a meaty income – ten-year government bonds yield more than 9 per cent.

The downside? The price reflects the high likelihood of the debt not being paid – meaning investors would lose their money.

No exchange-traded funds solely track the Venezuelan stock market, though US investment firm Teucrium is understood to have filed to launch one last week.

According to AJ Bell, just 17 actively managed funds available to UK retail investors have exposure to Venezuela, and this is through bonds rather than the stock market. Of these, Blue Bay Emerging Market Unconstrained Bond fund has the largest exposure, but this is still just 3.37 per cent of its portfolio.

That does not mean investors cannot get exposure. Oil is the main play here. Venezuela claims to hold about 17 per cent of the world’s oil reserves, the largest in the world, but the country pumps just a million barrels a day, down from 2.5 million a decade ago. Anna Rosenberg, head of geopolitics at Amundi Investment Institute, says daily production could rise by 300,000 barrels each year in an optimistic scenario.

She adds: ‘Venezuela’s history of seizing company assets means Western firms not already present will be reluctant to invest until the new power structures and security situation are clear.’

Matt Britzman at Hargreaves Lansdown says: ‘If sanctions ease and serious investment flows back into creaking infrastructure, it could add meaningful supply, but this won’t be a quick process.’