The numbers keep arriving, and they keep being larger than the ones before them. SIPRI's latest tally put global military expenditure at over $2.4 trillion in 2025 — a figure that, adjusted for inflation, represents the highest sustained level of defence spending since the peak years of the Cold War arms race. What makes this moment different from previous cycles is not just the scale, but the breadth. This is not one region rearming in response to a specific threat. It is the entire international system recalibrating at once, and the implications for defence procurement markets are going to play out over a decade, not a budget cycle.
The immediate triggers are obvious. Russia's full-scale invasion of Ukraine in February 2022 shattered the post-Cold War European security settlement in a way that even the most pessimistic analysts had not fully anticipated. The Iran-Israel confrontation has moved well beyond the indirect, deniable exchanges that characterised the previous decade — we are now watching direct strikes on sovereign territory and a level of regional tension that Gulf states cannot afford to treat as a spectator sport. In the Indo-Pacific, the calculus around Taiwan and the South China Sea has shifted the procurement priorities of Japan, South Korea, Australia, and the Philippines simultaneously. Every one of these dynamics is generating orders. Together they are producing a demand environment unlike anything the defence industry has seen in living memory.
The backlog figures coming out of the major Western prime contractors tell you something important about the duration of this cycle. Rheinmetall — the German company that has become something of a bellwether for European rearmament — had an order backlog of approximately €11 billion at the start of 2022. By the end of 2025 it had grown to over €60 billion. BAE Systems' order intake in 2024 was the highest in the company's history. Saab, Leonardo, Thales — all reporting multi-year backlogs that have forced them to turn away business rather than simply price it at a premium.
"The defence industry spent thirty years optimising for peacetime efficiency. It is now paying the price of that optimisation in production delays that are measured in years."
This is both a commercial opportunity and a structural constraint. The demand is real and the funding commitments are real — NATO members are now averaging defence spending closer to 2.5% of GDP than the 2% benchmark that was aspirational a decade ago, and several eastern flank members are comfortably above 3%. But the industrial base was not built for this. Skilled labour pipelines, specialist manufacturing equipment, raw material supply chains — all of these were calibrated for a lower-tempo environment, and rebuilding them takes time that procurement urgency cannot simply purchase away.
The gap between what governments want to buy and what Western manufacturers can deliver in the near term has created a significant opening for non-traditional procurement channels. South Korean manufacturers — Hanwha, Hyundai Rotem, Korea Aerospace Industries — have moved aggressively into markets that would previously have defaulted to American or European suppliers. Turkish manufacturers, benefiting from a domestic defence industry built up over twenty years of deliberate policy, are now competitive across a range of platform categories. And licensed intermediaries operating from neutral regulated jurisdictions, with the regulatory frameworks and international relationships built up over years of legitimate B2B defence trade, are increasingly central to transactions that do not fit neatly into the bilateral government-to-government model.
The procurement officers who are navigating this environment most effectively are those who have abandoned the assumption that the best supplier is necessarily the traditional one. The question is not where the equipment was made — it is whether it meets the specification, can be delivered on the required timeline, and can be acquired within a compliant regulatory framework. Those three criteria, applied honestly, open up a much broader supplier landscape than the one most procurement teams were working from five years ago.
One thing worth stating plainly: this cycle is not going to end when the current conflicts de-escalate. The structural changes to threat perception that have driven the rearmament surge are not reversible on a short timeline. European governments that have made public commitments to 2% GDP defence spending cannot credibly walk those back without domestic political consequences. Gulf states that have watched the Iran-Israel confrontation escalate are not going to reduce procurement budgets because a ceasefire is announced somewhere. The recalibration of global security assumptions that began in 2022 has created a procurement environment that will sustain elevated order volumes for the better part of a decade.
For suppliers, intermediaries, and procurement teams operating in this market, that is both the opportunity and the challenge. The demand is there. The question is whether the industrial base, the regulatory frameworks, and the commercial relationships are in place to convert that demand into delivered capability at the pace that governments are now requiring.