The independent Oxford Research Group said the most likely causes of future conflicts are climate change, competition over resources, social and economic marginalisation and increased militarisation.
"The war on terror is a dangerous diversion and prevents the international community from responding effectively to the most likely causes of future conflict," the report Global Responses to Global Threats: Sustainable Security for the 21st Century said.
The authors of the 18-month study criticised the war on terror for its high cost and suggested that it was "creating more recruits and supporters of terrorism than it defeats."
"There is abundant evidence that the 'war on terror' is proving deeply counterproductive, making the risk of future terrorist attacks... more not less likely," the group said.
The report noted that the war in Iraq has entered its fourth year and the conflict in Afghanistan is moving into its sixth year yet neither looks as if it will reach a conclusion. "Both countries are increasingly unstable and violent, while the Al-Qaeda movement is as active as ever," the authors said.
Unless the US and Britain change their security outlook in the next five years, the world will be highly unstable by the middle of the century, the report said.
The research group said a new strategy is needed to address the issues which create instability in the world.
It urges governments to invest in four key areas; renewable energy and conservation to counter climate change; energy efficiency to combat resource competition; poverty reduction programmes to defeat marginalisation; and ending development of weapons of mass destruction to stop militarisation.
"These provide the best chance of averting global disaster as well as addressing some of the root causes of terrorism," the group said.