Rising tensions drive global defence spending to record $2.63 trillion, think tank says

Four years after Russia's full-scale invasion of Ukraine, amid renewed plans by the world's governments to strengthen their armed forces and safeguard their homelands, the military balance is shifting. 

Global defence spending reached $2.63 trillion in 2025, up 2.5 per cent year on year, according to the latest edition of the Military Balance – an annual report by the International Institute for Strategic Studies (IISS).

In its 67th annual review, the London-based think tank noted that global defence dynamics are changing quickly, shaped in part by a change in US policy under President Trump's second term in office.  

• Strike a deal or face a strike: US continues military buildup in the Middle East
• Government rebuts former officials' claim that the Armed Forces have been hollowed out
• Four years to change the modern battlefield: Ukraine heralds new era of warfare

Key findings 

The Military Balance states that the US is increasingly focused on its homeland defence, highlighted by proposals for a "Golden Dome" missile defence system announced by President Trump in 2025.

It further states that US support for Ukraine has been curtailed, largely by commitments it faces in the Caribbean, the Indo-Pacific, and, more recently, in the Middle East, amidst rising tensions with Iran. 

Russia's war in Ukraine 

The invasion of its neighbour continues to impose severe costs on Moscow's war machine, and is imposing heavy casualties. 

Despite this, Russia has been able to sustain the size of its deployed forces, in turn increasing its defence spending to record levels immediately after 2022.

The report confirmed trackable growth in its military expenditure has decreased compared to previous years – 3% in real terms in 2025 – but still accounts for 7.3% of GDP. 

In absolute terms, defence spending is now roughly triple its 2021 level.

Europe and its Eastern Flank 

The IISS notes Europe's share of global defence spending is now 21%, up from 17% in 2022, with Germany's increase accounting for a quarter of all European growth since 2024. 

Belgium, Spain and the Nordic countries also had significant budget uplifts. 

This sustained growth reflects both the increased Russian aggression along the Alliance's most exposed region, and the US significantly reducing its role as guarantor of regional security – particularly in Europe.  

However, the IISS cautions that while efforts to reinforce the eastern flank are underway, addressing air and missile defence shortfalls remains a priority. Limited capacity and difficulties in increasing production continue to constrain Europe's rearmament efforts. 

China's sustained military activity 

Despite the long-running anti-corruption campaign within the Chinese People's Liberation Army (PLA) by President Xi Jinping, the conflict with its neighbour, Taiwan, is still ongoing – and has intensified. 

Beijing's military spending still outpaces the rest of Asia, to almost 44% in 2025 and up from an average of 37% between 2010 and 2020. 

The PLA Navy commissioned its largest and most capable aircraft carrier, the Fujian, late last year. Its entry into active duty marked a significant step forward for Beijing, which now has the world's largest navy in terms of sheer number of ships. 

IISS research confirmed that China launched 10 submarines with an estimated displacement of 79,000 tonnes between 2021 and 2025.

They included the ballistic-missile SSBNs such as the Type 094 (Jin-class) and attack or guided-missile submarines like the Type 093B (Shang-class) variants. 

Within that time frame, it outpaced the US Navy both in terms of hulls and tonnage.

BFBS Forces News will bring more coverage from the launch of The Military Balance, published by the International Institute for Strategic Studies, which is holding its launch event on 24 February.