Chinese aid to Iran and Pakistan is of more immediate regional and geopolitical significance to China, but that also does not provide the point of departure for a serious quest for global power status. An “anti-hegemonic” coalition could become a last-resort option if China came to feel that its national or regional aspirations were being blocked by the United States (with Japan's support). But it would be a coalition of the poor, who would then be likely to remain collectively poor for quite some time—Zbigniew Brzezinski in The Grand Chessboard.
Wars are no longer merely failures of diplomacy. They have become revenue systems. That is the uncomfortable truth behind the expanding arc of conflict stretching from Gaza to Lebanon, from Iran to the Gulf, and from South Asia to the western Pacific.
In an earlier age, the Non-Aligned Movement (NAM) and initiatives like détente spoke the language of disarmament, peaceful coexistence and negotiated settlement. Today, that language survives mostly in archives and ceremonial communiqués, while the real grammar of world politics is written in procurement contracts, emergency appropriations, debt issuance, sanctions evasion networks and strategic weapons pipelines.
The numbers alone reveal the scale of the transformation. The Stockholm International Peace Research Institute (SIPRI) estimates that world military expenditure reached a record US$2.718 trillion in 2024, the highest ever recorded, with the steepest annual rise since at least the end of the Cold War.
SIPRI further reported that the combined arms revenues of the world’s 100 largest arms-producing and military services companies climbed to US$679 billion in 2024, also a record. This is not a normal policy environment. It is a political economy in which insecurity is not simply managed; it is monetised.
Israel is the clearest current example of how a war state finances prolonged combat. A single benefactor or secret financial reservoir does not fund its wars. They are financed through the ordinary machinery of the state, enlarged by extraordinary geopolitical privilege. SIPRI says Israel’s military expenditure jumped to US$46.5 billion in 2024, equal to 8.8% of its GDP.
Sanctions do not end the war economy; they often reroute it into opaque channels where military and commercial finance fuse even more tightly
Reuters, citing Israel’s finance ministry, reported that spending on the Gaza and Lebanon wars alone reached 112 billion shekels, about US$31 billion, in 2024. To sustain this, Israel has relied on supplementary budgets, higher deficits and escalating debt.
Reuters also reported that Israel returned to global markets in January 2026 and raised US$6 billion in an international bond sale, while diaspora bond programmes launched after October 2023 have supplemented conventional borrowing. Fitch, on 27 March 2026, kept Israel at an A rating but warned that prolonged conflict and high military spending are clouding the fiscal outlook.
The support of the United States of America (USA) turns that fiscal strain into strategic sustainability. The longstanding U.S.-Israel framework provides US$3.3 billion annually in Foreign Military Financing, plus US$500 million annually for cooperative missile defence programmes. On top of this baseline, the U.S. State Department said on 1 March 2025 that the Trump administration had approved nearly US$12 billion in major Foreign Military Sales to Israel since taking office.
Brown University’s Costs of War project estimated at least US$21.7 billion in U.S. military aid to Israel from October 2023 to September 2025. The point is not merely that Washington subsidises Israeli military capacity; it is that this external underwriting reduces the normal fiscal constraints that might otherwise force an earlier strategic pause.
Iran finances resistance and rearmament differently, but the logic is similar: war is sustained by a state-linked resource system. U.S. Treasury releases describe how Iranian military entities, including the Ministry of Defence and Armed Forces Logistics (MODAFL) and the Islamic Revolutionary Guard Corps (IRGC), receive commodities such as oil as part of the military’s annual budget and generate revenue through sales abroad.
The U.S. Treasury has repeatedly targeted Iran’s “shadow fleet”, shadow banking and oil-smuggling networks, saying these petroleum and petrochemical revenues help fund Iran’s missile programmes, weapons procurement and proxy activity. In other words, sanctions do not end the war economy; they often reroute it into opaque channels where military and commercial finance fuse even more tightly.
The Gulf monarchies illustrate yet another variant of the same structure: petrodollar militarisation. SIPRI reports that Saudi Arabia spent US$80.3 billion on its military in 2024, remaining the biggest military spender in the Middle East and the seventh largest globally.
In arms transfers, the Gulf remains central: for 2021–25, Saudi Arabia ranked as the world’s third largest arms importer, Qatar fourth and Kuwait ninth. More than half of all arms imports into the Middle East came from the United States, with Italy, France and Germany also major suppliers. This means the Gulf is not just a theatre of strategic rivalry; it is a premium market for advanced weapons systems, financed above all by hydrocarbon rents. The United States sits at the apex of this order.
The war economy does not merely respond to conflict. It prepares for it, profits from it, and then calls the result realism
SIPRI claims it remained by far the world’s largest exporter of major arms in 2021–25, and its own State Department announced on 16 March 2026 that U.S. arms transfers and defence trade in fiscal year 2025 included multibillion-dollar packages for partners across the Middle East, including a US$6.75 billion munitions-related package for Israel. Even when Washington presents itself as a crisis manager, it is simultaneously an arsenal supplier, alliance banker and geopolitical insurer. That triple role makes the arms economy not peripheral to U.S. foreign policy, but central to it.
China is different, but not exempt. Beijing has sought to avoid direct participation in major external wars, yet SIPRI estimates its military spending still rose 7% to US$314 billion in 2024. That increase reflects the structural pressure of an arms-driven world: even a power that wants to present itself as a stabiliser must spend vast sums because rivals, alliances and regional security dilemmas are all moving in the opposite direction. Peace is now expensive because war preparedness has become the baseline.
South Asia offers the most tragic and durable proof of how unresolved disputes harden into permanent military markets. SIPRI’s latest arms-transfer fact sheet confirms that India was the world’s second largest arms importer in 2021–25 and Pakistan the fifth largest. Pakistan’s imports rose by 66% compared to the previous five-year period, with 80% of those imports originating from China.
SIPRI explicitly links India’s imports to tensions with both China and Pakistan and notes that imported major arms were used in the India–Pakistan clash of May 2025. This is the classic war-economy trap: diplomacy is postponed, procurement is accelerated, and each side’s insecurity becomes the other side’s justification.
That is why the decline of the Non-Aligned Movement’s disarmament ethic matters so much. NAM once treated nuclear disarmament and arms reduction not as pious add-ons but as conditions for genuine sovereignty and development.
SIPRI’s work on the Non-Proliferation Treaty (NPT) review process notes that NAM pushed for a time-bound path to the elimination of nuclear weapons rather than endless conditionality. That older imagination has been displaced by a world in which strategic autonomy is too often confused with arms accumulation, and national pride is measured less by human development than by missile range, air-defence layers and procurement volume.
The result is a vicious cycle. Arms companies need threat narratives. States cite those threats to justify larger budgets. Debt markets and external patrons make the budgets feasible. Exporters need clients; clients need adversaries. Wars then become demonstrations for the next generation of weapons, and shattered societies become advertisements for more “deterrence”. In that system, peace is not merely neglected. It is commercially inconvenient.
The central question, then, is not simply where Israel gets the money for Gaza, Lebanon and Iran. It gets the money where modern war states usually do: from taxpayers, bondholders, external sponsors and a permissive global arms market. The larger question is why the international system keeps making such wars financially sustainable.
Until that question is confronted, every ceasefire will remain temporary, every arms build-up will present itself as a defensive necessity, and every new conflict will be explained as regrettable but unavoidable.
The truth is harsher. The war economy does not merely respond to conflict. It prepares for it, profits from it, and then calls the result realism.