Geopolitical Tensions Fuel Defense and Riot Control Markets: Short-Term Investment Opportunities in 2025

The world in 2025 is defined by a fragile geopolitical landscape. From the protracted conflict in Ukraine to escalating tensions in the Middle East, the demand for advanced defense systems and riot control technologies has surged. This volatility has created a tailwind for defense and security markets, with European nations leading a rearmament push that is reshaping global supply chains and investment flows. For investors, the question is no longer whether to participate in this sector but how to identify the most compelling short-term opportunities.

The Defense Industry: A Rearmament Boom

According to a Morningstar report, European defense budgets are projected to grow at an annual rate of 6.8% from 2024 to 2035, outpacing growth in the U.S., Russia, and China. This surge is driven by a strategic shift toward self-sufficiency, as nations like Germany remove caps on military spending. Germany's recent commitment of $108.32 billion to defense funding has directly benefited companies like Rheinmetall, which has seen its shares surge over 273% in the past year, according to a MarketMinute article. The company's Panther KF51 main battle tank and air defense systems are now central to NATO's modernization plans.

Similarly, BAE Systems has capitalized on its role in the Eurofighter Typhoon and F-35 programs, with its stock up 49% year-to-date, according to a Fortune profile. Analysts at Goldman Sachs have initiated a "Buy" rating on Rheinmetall with a price target of €2,200, citing its undervaluation relative to its fair value estimate of €2,220, per an Investing.com report. The firm's exposure to land-based systems and artillery contracts positions it to benefit from the EU's €800 billion ReArm Europe Plan.

However, challenges persist. Supply chain bottlenecks for semiconductors and critical materials remain a drag on production timelines. Yet, companies like Lockheed Martin, with its $115 billion market cap and 2.6% dividend yield, offer a more stable alternative for investors wary of European market volatility, according to a Finexplain analysis.

Riot Control Technology: A Niche with Explosive Growth

While defense spending dominates headlines, the riot control technology market is quietly becoming a hotspot. A 2025 Global Growth Insights report projects the market to reach $2.14 billion this year, growing at a 3.8% CAGR through 2034. This growth is fueled by the adoption of non-lethal weapons-rubber bullets, stun grenades, and LRAD acoustic devices-which now account for 65% of global riot control procurement.

BAE Systems and Taser International are leading this charge. BAE's non-lethal systems, including its VECTOR less-lethal rounds, have been integrated into police forces across Europe and North America. Taser, now a subsidiary of Axon Enterprise, has seen demand for its X3 stun guns and AI-powered body cameras surge, particularly in the U.S., where 60% of North American market share is concentrated.

Yet, ethical concerns linger. Nearly 47% of civil rights groups oppose the proliferation of riot control tech due to risks of misuse. This creates a regulatory overhang, but also highlights the importance of companies with strong corporate governance frameworks.

Short-Term Opportunities: Stocks to Watch

For investors seeking immediate exposure, European defense stocks offer the most compelling case. Rheinmetall's 228% year-to-date surge reflects its dominant position in armored vehicles and air defense systems, according to an Analytics Insight report. Morningstar analyst Loredana Muharremi notes that the company's fair value estimate of €2,220 suggests further upside, particularly as Germany's defense budget expands.

Thales, another European giant, is benefiting from its SEACURE underwater warfare program and digital battlefield solutions, with a fair value estimate of €308. Its 16% stock gain year-to-date underscores its appeal in a market prioritizing maritime and cyber defenses.

In the U.S., Lockheed Martin remains a safer bet. Its P/E ratio of 17 and consistent dividend yield make it attractive for income-focused investors, while its sixth-generation fighter jet contracts with the Pentagon ensure steady revenue.

Risks and Ethical Considerations

No investment thesis is without risks. Supply chain disruptions could delay critical projects, and geopolitical shifts-such as a de-escalation in Eastern Europe-might curb demand. Additionally, the ethical implications of investing in companies producing riot control tech cannot be ignored. As noted by Global Growth Insights, 47% of civil rights organizations have raised concerns about human rights abuses linked to these tools.

Conclusion: A Sector in Motion

The defense and security markets in 2025 are being reshaped by geopolitical instability, with European rearmament and the rise of non-lethal technologies driving growth. For short-term investors, companies like Rheinmetall, BAE Systems, and Lockheed Martin offer a mix of capital appreciation and defensive qualities. However, due diligence is required to navigate supply chain risks and ethical debates. As the sector evolves, nimble investors who align with companies at the forefront of innovation-while remaining mindful of broader societal impacts-stand to benefit most.