World Stumbles Into "More Dangerous Decade" As Defense Spending Soars, Says Military Think Tank

As the second anniversary of Russia's invasion of Ukraine is less than two weeks away, a British military think-tank warned Tuesday in a report that the world is facing "what is likely to be a more dangerous decade." 

"The current military-security situation heralds what is likely to be a more dangerous decade, characterized by the brazen application by some of the military power to pursue claims," the International Institute for Strategic Studies (IISS) wrote in its annual report titled "Military Balance." 

IISS said the "era of insecurity" has reshaped the global defense-industrial landscape, with the US and Europe quickly increasing ammunition and missile production "after decades of underinvestment." The reversal was triggered by Russia's invasion of Ukraine, Israel's war against Hamas militants in Gaza, and increasing uncertainties in the South China Sea.

"Russia's aggression spurred European countries to boost defense spending and has strengthened NATO, with Finland adding combat power," the IISS said, adding, "The pace of ammunition expenditure in the war between Russia and Ukraine has also caused a reckoning in the West that production capacities have atrophied, with countries scrambling to rectify shortcomings from years of underinvestment. "

Driven mainly by NATO member states in response to Russian President Vladimir Putin's war in Ukraine, global defense spending surged 9% to a record 2.2 trillion dollars in 2022. 

We have previously reported global defense orders are soaring as countries prepare for the emergence of the multipolar world. This era of instability has sent MSCI's global defense index to record highs. 

IISS' report was published days after former president and current presidential candidate Donald Trump said he would not protect European NATO allies from a Russian attack if they were not spending enough on their own defense. 

"You got to pay. You got to pay your bills," Trump told the audience at a campaign rally in South Carolina Saturday.

Meanwhile, as Statista's Katharina Buchholz details below, the goal of 2% of GDP in military spending that NATO has set for itself was not reached in many European countries as of mid-2023, even though improvements have been made, especially in Eastern Europe.

"A just-in-time mindset that has persisted for almost three decades is giving way to a just-in-case approach, though delivering on these ambitions is challenging," the report noted. This dangerous multipolar world bodes well for the bull market in the defense sector.