Defense sector sees record spending growth and a surge in interstate wars

European military expenditure reached $2.8 trillion worldwide in 2025 and, excluding Russia, rose 71 % since 2020. Analysts at AlixPartners project Europe’s defence budget could climb from $633 billion to over $1 trillion within the next decade, driven mainly by Germany and Poland, while Italy, France and the United Kingdom benefit from long‑term defence programmes. The rapid rise in orders is outpacing production capacity, with the order book of major European and U.S. firms expanding from $762 billion in 2021 to $1 223 billion in 2025. Companies such as MBDA, Rheinmetall and BAE Systems face pressure to boost manufacturing, while artificial‑intelligence tools, autonomous drones and venture‑capital‑backed start‑ups (over 2 600 firms and €70.5 billion invested since 2019) reshape the sector.

The 2026 SIPRI Yearbook highlights a parallel escalation in armed conflict: the number of interstate wars doubled from three to six, involving at least thirteen states—including Afghanistan‑Pakistan, Cambodia‑Thailand, India‑Pakistan, Iran‑Israel/US, Russia‑North Korea versus Ukraine, and the Democratic Republic of the Congo‑Rwanda. Total deaths from conflicts fell slightly to 238 000, but five wars each caused more than 10 000 fatalities (Ukraine, Sudan, Israel‑Palestine, Myanmar, Nigeria). Precision weapons, autonomous systems, drone swarms and cyber operations are increasingly used, alongside a rise in humanitarian‑law violations such as child soldier recruitment and sexual violence.