The International Institute for Strategic Studies reported that global defense spending reached $2.63 trillion in 2025, a 2.5 percent increase from the previous year, largely fueled by higher expenditures in Europe, Asia and the Middle East.
What Is Driving Global Growth?
According to the IISS Military Balance report published Tuesday, global defense spending growth in 2025 was driven primarily by heightened geopolitical tensions and sustained military modernization efforts, particularly in Europe. Increased investment across NATO countries, spurred by Russia’s war in Ukraine and alliance commitments to raise defense spending, accounted for much of the expansion.
Additional growth came from Asia, where China’s rising military budget and regional security concerns prompted higher spending among neighboring states, as well as from the Middle East and parts of Africa amid ongoing conflicts and instability. Together, these factors sustained the upward trajectory in global defense outlays despite slower growth in the U.S. and Russia.
How Did Europe Help Shape the 2025 Trend?
European defense budgets rose nearly $100 billion year over year to almost $563 billion, representing a 12.6 percent real-term increase and lifting the region’s share of global military spending to more than 21 percent. Germany led regional growth with an 18 percent rise to $107 billion, while Nordic countries spent a combined $53.7 billion, more than double their 2020 levels.
NATO members’ pledge to raise defense and security spending to 5 percent of gross domestic product, or GDP, by 2035 reinforced expectations of continued elevated outlays into 2026.
How Did Asia & MENA Contribute?
Asian defense budgets rose to $573 billion, up 5.7 percent year over year. This was mainly driven by China, whose spending accounts for roughly 44 percent of the region’s total, up from 39 percent in 2017. Indonesia and Singapore also contributed to regional spending growth.
Middle East and North Africa, or MENA, budgets rose by 4.5 percent to $219 billion amid continued instability. Saudi Arabia, Israel and Algeria were among the key contributors. Regional spending as a share of GDP averaged 4.3 percent, up from 3.5 percent in 2022.