Global military expenditure rose by 2.5% in 2025 to a record $2.63 trillion (€2.23 trillion) in response to rising geopolitical tensions, according to the Military Balance 2026, released today.
The report by the British think tank International Institute for Strategic Studies (IISS) highlighted a significant shift in U.S. defense policy under the second administration of U.S. President Donald Trump.
“President Trump strengthened the country’s defenses and (…) began to roll back long-standing U.S. defense commitments, demanding greater burden-sharing from allies, both in Europe and the Asia-Pacific,” the introduction noted.
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The proposed ‘Golden Dome’ missile defense program exemplifies this White House focus, which has reduced direct support for Ukraine and is facing tensions across several regions, particularly the Middle East.
Europe’s share of global defense spending accelerated to more than 21%, up from 17% in 2022, reflecting governments’ efforts to address the threat posed by Russia and to offset reduced U.S. engagement in security matters.
Germany alone accounted for around 25% of Europe’s total spending growth since 2024, while Belgium, Spain, and the Nordic countries also recorded significant increases.
According to the annual report, now in its 67th edition, Portugal increased its defense budget to €3.07 billion in 2025, up 8% year-on-year, with spending forecast to rise a further 22% in 2026 to €3.77 billion.
Even so, the IISS warned that slow procurement reforms and limited industrial capacity are constraining Europe’s ability to scale up production and strengthen defenses on NATO’s eastern flank, particularly in critical areas such as air and missile defense.
The report identified China as the main driver of military growth in Asia, expanding its share of regional defense spending to 44% in 2025, up from an average of 37% over the previous decade. Despite recent internal purges within the command of the People’s Liberation Army, Beijing’s capabilities appear to have remained unaffected.
The People’s Liberation Army Navy commissioned its third aircraft carrier, the Fujian, and launched ten new nuclear submarines between 2021 and 2025. At the same time, China unveiled advanced missile systems, including the JL-1 air-launched ballistic missile, during the 2025 Victory Day parade.
The report also highlighted the deepening of U.S. security partnerships across the Persian Gulf, particularly with Qatar, Saudi Arabia, and the United Arab Emirates.
Regional defense spending in the Gulf reached $219 billion (around €186 billion) in 2025, with countries allocating an average of 4.3% of gross domestic product (GDP) to defense—one of the highest rates in the world.
