Global energy markets faced fresh upward pressure on oil prices Monday, as stalled peace negotiations between the United States and Iran pushed benchmark crude to a near three-week high, just as a new independent report revealed global military expenditure climbed to its highest level in 16 years last year.
Brent crude, the global benchmark for oil prices, jumped more than 2% to settle at $107.97 per barrel on Monday, its highest point recorded since mid-March. Market analysts attribute the sharp rally primarily to the breakdown of diplomatic talks between Washington and Tehran, which has extended existing uncertainty over energy export supplies from the Middle East. Persistent tensions around the Strait of Hormuz — a strategic chokepoint through which roughly 20% of global oil supplies pass daily — remain a core driver of elevated price risk, with ongoing regional conflict pushing Asian liquefied natural gas (LNG) prices far above pre-war levels already.
The sudden price surge has compounded existing inflation concerns among investors and policymakers, coming just ahead of a week packed with high-stakes monetary policy meetings from major central banks around the world. Traders have now largely priced out any expectations of interest rate cuts this year, as higher energy costs are expected to keep core inflation stickier than previously projected, prolonging tight monetary conditions.
In a separate report released Monday, the Stockholm International Peace Research Institute (SIPRI) announced that global military spending rose 2.9% in 2025 to reach $2.89 trillion, marking the 11th consecutive annual increase. Total global military expenditure now accounts for 2.5% of global gross domestic product, the highest share recorded since 2009.
Despite a 7.5% drop in U.S. military outlays in 2025 — driven primarily by the pause in new military aid funding for Ukraine — the United States remains the world’s largest military spender by a wide margin, with total expenditure hitting $954 billion last year. SIPRI analysts emphasize that the 2025 drop is almost certainly temporary: U.S. Congress has already approved a $1 trillion+ military budget for 2026, with projections indicating spending could rise to as much as $1.5 trillion by 2027.
European military spending recorded the most dramatic regional growth last year, jumping 14% to $864 billion. The increase is largely fueled by the ongoing war in Ukraine, as NATO member states across the continent have ramped up defense budgets to boost collective security. Both Russia and Ukraine also substantially increased their own defense outlays in 2025, marking the fourth full year of open conflict between the two nations.
By contrast, both Israel and Iran recorded slight drops in military spending last year. Israel’s expenditure fell 4.9% following a partial de-escalation of conflict in Gaza, while Iran recorded a 5.6% drop — its second consecutive annual decline in military outlays.