Arms merchants from around the world sold weapons to the nations of the Middle East worth $76 billion from 1981 to 1985, including more than $30 billion in sales to the warring countries of Iran and Iraq, according to a report released yesterday by the Arms Control and Disarmament Agency (ACDA).

"The Middle East was the dominant market in 1981-1985 for nearly all major supplier countries and groups," the report said in an analysis based on Central Intelligence Agency and Defense Intelligence Agency data.

From 1981 to 1985, the most recent year for which figures were available, the Soviet Union was Iraq's biggest arms supplier with $7.4 billion in sales, the report said. France provided Iraq $5.1 billion in weapons during this period, and China sold Iraq arms worth $3.1 billion, according to figures that ACDA said were uncertain.

The authors of the report declined to indicate, on grounds that the information was secret, which countries sold most of the arms to Iran during the period. But it lists weapons sales of $575 million from China and $370 million from the Soviet Union in addition to $5.3 billion from "other" countries.

The Reagan administration has recently accused China of also selling Iran up to 30 ground-launched Silkworm missiles in 1986 that are capable of damaging ships in the Persian Gulf, although none is operational. President Reagan has also acknowledged authorizing up to $30 million in secret U.S. arms sales to Iran from 1985 to 1986, none of which was mentioned in the 17th annual report by ACDA.

Overall arms sales to Iran and Iraq dropped by $6.8 billion from 1984 to 1985, although the report did not mention the efforts of the Reagan administration beginning in 1984 to impose a worldwide embargo on weapons trading with the two enemies.

Overall arms sales to developing countries dropped 37 percent, a decline the report attributed to widespread economic hardships. At the same time, worldwide military spending continued to grow, reaching an estimated $900 billion in 1985 through budget increases among developed countries.

Roughly three-quarters of the world's military expenses in 1984 were borne by the North Atlantic Treaty Organization (NATO) and the Warsaw Pact, the report said, with NATO outspending the Pact by 7 percent in the four-year period beginning in 1981. NATO also bested the Warsaw Pact with 33 percent more arms exports for 1985, continuing a four-year trend.

China was one of the few countries to reduce military forces during the past few years, and had 650,000 fewer soldiers in 1984 than in 1981. The Soviet Union had the most military personnel in 1984, with 4.5 million, followed by China with 4.1 million, the United States 2.2 million, India 1.3 million and Vietnam 1 million.