Beyond Defense: Why Are Cyber ETFs the Hottest War Trade Right Now?

The escalating conflict across the Middle East intensified dramatically on Feb. 28, 2026, with the launch of the United States–Israel joint offensive, Operation Epic Fury, and has rapidly evolved into a trans-regional war in recent weeks. Beyond kinetic strikes on military and nuclear infrastructure, a parallel and relentless battle rages in the digital domain.

As physical supply chains are disrupted and communication networks are targeted, the conflict has underscored a modern reality — war is no longer fought with missiles alone. While defense contractors see a surge in orders for hardware, this "new era of warfare" is driving unprecedented demand for the software shield.

Consequently, companies building the digital ramparts, and by extension, the cybersecurity exchange-traded funds (ETFs) that hold them, are positioned for significant strategic growth amid the heightened threat landscape.

Before diving into the specifics of these ETFs, it is important to examine how this warfare could benefit cybersecurity firms and the ETFs that hold them, as digital resilience has become a mandatory pillar of national survival rather than an optional weapon.

The Digital Frontline: A War-Driven Demand for Cyber Defense

There is a direct, positive correlation between modern geopolitical conflict and the valuation of cybersecurity companies. In the modern warfare landscape, cyberattacks serve as the "first mover" in any engagement.

After President Donald Trump confirmed that the U.S. military had begun major operations in Iran, it was reported that the country plunged into a near-total internet blackout, with nationwide connectivity dropping to roughly 4% of normal levels (as per a report by Forbes). This implies that a cyber operation paralyzed nearly 96% of Iran’s internet traffic and compromised its command-and-control systems.

Cybersecurity and threat intelligence firms like those mentioned below — whose technologies help secure government networks, critical infrastructure and financial systems in the United States and Israel — are likely to benefit from the escalating conflict in the Middle East.

These key beneficiaries include:

• Palo Alto Networks PANW: Its Unit 42 threat intelligence team is currently at the forefront of identifying Iranian "cyber proxies" targeting U.S. and Israeli government networks.

• CrowdStrike CRWD: Its AI-driven endpoint protection is critical for the U.S. Department of Defense to thwart state-sponsored "wiper" malware and ransomware.

• Check Point Software CHKP: As an Israeli-based giant, it provides essential firewall and network security services directly to the Israel government and local military infrastructure.

• Cloudflare NET: Essential for protecting government websites and critical utilities against the surge in Distributed Denial of Service (DDoS) attacks that have spiked since the conflict began.

• Radware RDWR: As an Israel-based company providing cyber defense solutions, it is on the front lines, protecting networks from the daily barrage of attacks.

What’s the Merit of Cyber ETFs?

In the first week following the United States-Israel joint force attack on Iran, shares of cybersecurity companies like PANW saw a spike in price and have been on an uptrend since then. This surge in individual cybersecurity stocks naturally boosts the performance and profitability of cybersecurity ETFs, which offer diversified exposure to the entire sector.

For instance, the First Trust Nasdaq Cybersecurity ETF, which counts Palo Alto Networks and CrowdStrike as its top holdings, climbed nearly 5% in the first week of March alone, significantly outpacing the flat performance of the S&P 500.

As the intensifying conflict across the Middle East reinforces that cyber threats will remain elevated, governments and corporations are likely to maintain or increase their cybersecurity spending. This creates a sustained tailwind for the profitability of companies within these funds, making the current geopolitical climate a compelling reason for investors to place cybersecurity ETFs under the spotlight as a strategic holding.

Cyber ETFs Under Spotlight

Considering the above-mentioned discussion, the following cybersecurity ETFs demand a prudent investor’s attention:

First Trust NASDAQ Cybersecurity ETF CIBR

This fund, with net assets worth $9.83 billion, offers exposure to 32 companies engaged in the cybersecurity segment of the technology and industrials sectors, primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices, to protect the integrity of data and network operations. CRWD holds the second position in this fund (7.71 % weightage), PANW the third (7.70%) and NET the ninth (4.72%).

CIBR has rallied 1.2% over the past year and surged 3.8% since Feb. 28, 2026. The fund charges 58 basis points (bps) as fees. It traded at a volume of 1.78 million shares in the last trading session.

Amplify Cybersecurity ETF HACK

This fund, with net assets worth $1.97 billion, offers exposure to 23 companies actively involved in providing cybersecurity solutions that include hardware, software, and services. NET holds the sixth position in this fund (5.47%), PANW the eighth (5.15%) and CRWD the 10th (5.02%). CHKP holds the 13th position in this fund (3.77%), while RDWR the 15th (3.45%).

HACK has rallied 5.6% over the past year and soared 6.6% since Feb. 28, 2026. The fund charges 60 bps as fees. It traded at a volume of 0.06 million shares in the last trading session.

Global X Cybersecurity ETF BUG

This fund, with net assets worth $843.4 million, offers exposure to 29 companies that stand to potentially benefit from the increased adoption of cybersecurity technology, such as those whose principal business is in the development and management of security protocols preventing intrusion and attacks to systems, networks, applications, computers and mobile devices. PANW holds the first position in this fund (11.43%), CRWD the fourth (6.19%) and CHKP the fifth (5.92%). RDWR holds the 18th position (2.51%).

BUG has lost 18.9% over the past year but soared 6.5% since Feb. 28, 2026. The fund charges 51 bps as fees. It traded at a volume of 0.45 million shares in the last trading session.

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Check Point Software Technologies Ltd. (CHKP): Free Stock Analysis Report

Radware Ltd. (RDWR): Free Stock Analysis Report

Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report

Amplify Cybersecurity ETF (HACK): ETF Research Reports

First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports

CrowdStrike (CRWD): Free Stock Analysis Report

Cloudflare, Inc. (NET): Free Stock Analysis Report

Global X Cybersecurity ETF (BUG): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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