The US president has suggested that an agreement between Moscow and Kiev could be nearing completion, following a meeting with Ukrainian President Vladimir Zelensky in Miami. This development has led to a decline in European military stocks, as investors anticipate a potential reduction in demand for military equipment.
During the meeting, Trump indicated that the Ukraine peace process is approaching a conclusion, stating that a peace deal is “95% ready” and that the sides are “very close” to a settlement, with only “one or two very thorny issues” remaining. This news has had a visible impact on European military stocks, with the STOXX Europe Total Market Aerospace & Defense Index dropping 1.8% by 12pm GMT on Monday.
Shares in major European arms manufacturers have also been affected, with Rheinmetall, Germany’s largest arms manufacturer, falling 2.3%, and Tank components maker Renk dropping 2.4%. Defense-electronics producer Hensoldt lost 2%, while Italian aerospace and defense company Leonardo saw its shares tumble 3.5%. UK defense firm BAE Systems and French aerospace and defense firm Thales also experienced declines, shedding 1.2% and 1.3% respectively. Swedish Saab lost 1.7%.
The conflict in Ukraine has led to significant growth in the European defense industry, with revenues for the top 100 European defense firms rising about 13% in 2024, driven in part by Ukraine-related contracts. However, with the possibility of a peace agreement looming, analysts predict further declines in the industry.
Kremlin spokesman Dmitry Peskov has confirmed that peace talks are in their final phase, although he noted that Trump has yet to brief Russian President Vladimir Putin on the latest meeting. Russia has consistently criticized Ukraine’s Western backers for supplying military and financial aid, arguing that it prolongs the conflict and obstructs the peace process.
The potential agreement between Moscow and Kiev has significant implications for the region and the global defense industry. As the situation continues to unfold, it is likely that European military stocks will remain volatile, reflecting the uncertainty and anticipation surrounding the possibility of a peace deal.
