Defence budgets are rising faster, more broadly, and with more political durability than at any point since the end of the Cold War, and the question facing every procurement office and trading desk is no longer whether spending will grow but how far and how fast. The headline numbers are already striking. Global military expenditure reached a record in 2025, and the forces driving it, a major European rearmament, sustained great power competition in Asia, and an unstable Middle East, are all still in motion as 2026 runs its course. This analysis sets out where defence spending stands now, where it is most likely to go through the rest of 2026, and what the picture looks like as the world moves towards 2030. It is a companion to our earlier market projections through 2030, focused this time on the budgets themselves rather than the trade flows they generate.
A word of caution belongs at the start. Defence spending figures are estimates, they are compiled on different bases by different institutions, and several large spenders deliberately understate or conceal portions of their outlays. The numbers below should therefore be read as well sourced approximations that capture direction and scale reliably, even where the precise decimal is contested. With that said, the direction is not in doubt. Almost everything points up.
World military expenditure hit roughly 2.89 trillion dollars in 2025, a real terms rise of close to three percent and the eleventh consecutive year of increase. That pushed the global military burden, the share of world output devoted to defence, to about 2.5 percent, the highest level since 2009. The concentration at the top remains extreme. The three largest spenders, the United States, China, and Russia, together accounted for around 1.48 trillion dollars, just over half of the entire global total.
| Defence spending by major actor | 2025 (approx) | 2026 direction |
|---|---|---|
| World total | ~$2.89 trillion | Rising, approaching $3 trillion |
| United States | ~$1.0 trillion | Over $1 trillion approved, up sharply |
| China (official) | ~$245bn to $277bn | +7% to about $277bn |
| Russia | ~$160bn to $170bn | First nominal cut since 2022 |
| Europe (total) | ~$864bn | Up after a 14% surge in 2025 |
| Middle East | ~$218bn | Rising, Gulf budgets up around 20% |
The single most important shift for the rest of 2026 is on the American side. The defence budget approved by the United States Congress for 2026 has risen above one trillion dollars for the first time, a substantial jump from the prior year, and proposals on the table could carry it towards 1.5 trillion dollars in 2027. After a year in which American spending actually dipped, this marks a decisive return to growth at the very top of the table, and because the United States is so large a share of the global figure, its trajectory effectively sets the slope of the world total. On current approvals, global spending is on track to approach or exceed three trillion dollars across 2026.
"The defining feature of this cycle is not a single war but the conviction, now shared across capitals, that elevated defence spending is the new baseline rather than a temporary spike."
If the United States sets the slope, Europe is supplying the acceleration. European military spending rose by around fourteen percent in 2025 to roughly 864 billion dollars, and that single regional jump was the largest contributor to the global rise. The driver is structural rather than reactive. At the 2025 summit in The Hague, NATO members committed to spending five percent of GDP on defence and security by 2035, broken into at least 3.5 percent on core defence and up to a further 1.5 percent on related areas such as critical infrastructure and the defence industrial base. That pledge converts a wartime surge into a decade long obligation, which is exactly why the European increase is so likely to persist through 2026 and beyond. We examined the industrial strain behind it in our analysis of Europe's ammunition gap, and the spending now flowing is in large part an attempt to close that gap.
The interim trajectory matters as much as the 2035 headline. Average NATO spending is expected to climb from around 2.2 percent of GDP towards three percent over the next decade, with most members reaching the older two percent floor within the next few years. For equipment specifically, NATO Europe procurement is forecast to grow at roughly fifteen percent a year, reaching something on the order of 340 billion dollars by 2030. That equipment figure is the one defence trading firms should watch most closely, because it represents new buying rather than personnel and pensions.
The growth is not confined to the transatlantic world. China raised its official defence budget by seven percent for 2026, to around 277 billion dollars, and while that is the slowest announced rise in five years it still outpaces the country's own economic growth target. Independent analysts consistently judge the real figure to be considerably higher than the published one, with credible estimates placing actual Chinese outlays well above three hundred billion dollars once off budget items are included. The direction in Asia is firmly upward, and the regional security concerns driving it show no sign of easing.
The Gulf is the third pillar. Middle East spending reached an estimated 218 billion dollars in 2025, and Gulf budgets are expected to rise by roughly a fifth as the region absorbs the lessons of repeated missile, drone, and saturation attacks. Saudi Arabia has allocated close to 64 billion dollars for 2026 and the United Arab Emirates around 27 billion dollars, with both states increasingly prioritising air and missile defence and a domestic industrial base rather than simple off the shelf purchasing. This is the demand environment closest to home for any UAE based trader, and it is widening at exactly the moment the threat picture justifies it.
Pulling the threads together, the most probable path to 2030 is one of sustained, broad based growth rather than a plateau. Estimates for global military expenditure cluster around a compound annual growth rate of roughly five percent through the rest of the decade, which would carry world spending well clear of three trillion dollars on a durable basis. The table below sets out the major trajectories side by side.
| Trajectory towards 2030 | Direction | Principal driver |
|---|---|---|
| Global military expenditure | ~5% CAGR, 2025 to 2030 | Broad based rearmament |
| United States | $1 trillion now, proposals towards $1.5 trillion by 2027 | Great power competition |
| NATO average | From ~2.2% towards 3% of GDP, 5% headline goal by 2035 | The Hague 2025 pledge |
| NATO Europe equipment | ~15% CAGR to ~$340bn by 2030 | Ukraine lessons, ammunition gap |
| China | ~7% a year, above GDP growth | Modernisation and Taiwan focus |
| Gulf | ~20% rise, Saudi towards $64bn and beyond | Missile and drone threat |
Two risks could bend this curve. The first is fiscal. Several of the largest spenders, Russia most visibly, are running into the hard limits of what their economies can sustain, and even some European states face difficult budget arithmetic in honouring their pledges. Russia has already announced its first nominal defence cut since the full scale invasion, a point we explored in our look at whether, by the numbers, Ukraine is winning the war. The second risk is political durability, the chance that a change of government or a sudden peace dampens the appetite to keep spending. On the evidence so far, neither risk looks strong enough to reverse the trend, only to moderate its pace in particular countries.
For procurement officers and defence trading firms, the strategic conclusion is unusually clear. The market is not merely large, it is expanding on a multi year basis with political commitments behind it, which removes much of the guesswork that normally surrounds demand forecasting. This is the structural backdrop we described in arguing that the sector is enjoying its best decade since the Cold War, and the budget numbers set out here are the hard evidence beneath that claim. The same dynamic is what continues to drive the record Western defence orders flowing through the system.
The practical priorities follow directly from where the money is going. Demand is concentrating in equipment and munitions rather than headcount, in air and missile defence above almost everything else, and in domestic industrial capacity that buyers increasingly want built into the deal rather than bolted on afterwards. For a trading firm, that rewards the ability to source quickly, to offer depth across interceptors, counter drone systems, and consumables, and to navigate export control and offset requirements that grow more demanding as budgets grow larger. The firms that prosper towards 2030 will be the ones that treat this not as a temporary boom to be exploited but as a structurally higher baseline to be served, because every credible projection points to the same conclusion, which is that the world is going to spend more on defence for years to come, and the question for any supplier is simply whether it is positioned to meet that demand.