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European Defense Stocks Slide as Trump Signals Progress in Ukraine-Russia Peace Talks

European Defense Stocks Slide as Trump Signals Progress in Ukraine-Russia Peace Talks. Source: Image by Gerd Altmann from Pixabay

European defense stocks moved lower on Monday after comments from U.S. President Donald Trump suggested renewed momentum in peace negotiations between Ukraine and Russia, dampening near-term expectations for sustained defense spending growth across the region.

Shares of Germany’s Rheinmetall declined 2.1%, Italy’s Leonardo dropped nearly 4%, while the U.K.-based BAE Systems and France’s Thales each fell around 1.5% by 09:04 GMT. The pullback reflected investor sensitivity to geopolitical developments, as defense stocks have rallied strongly in recent years on the back of the prolonged Ukraine conflict and rising military budgets.

Market sentiment shifted after Trump said he had made “a lot of progress” during discussions with Ukrainian President Volodymyr Zelenskiy regarding a potential peace deal. Speaking to reporters following their meeting at Trump’s Mar-a-Lago estate, the former president cautioned that negotiations could still take weeks and emphasized that there was no fixed timeline for a final agreement. Nevertheless, he described Moscow and Kyiv as being “closer than ever” to a resolution, following a phone call with Russian President Vladimir Putin on Sunday, and confirmed plans for further talks with Putin.

Zelenskiy added to the cautiously optimistic tone, stating that a 20-point peace plan presented last week was “90 percent agreed,” while U.S.-Ukraine security guarantees were “100 percent agreed.” He stressed that security assurances are a key milestone toward achieving lasting peace and said negotiating teams would continue working through remaining issues.

Despite the positive rhetoric, significant obstacles remain. Trump acknowledged that one or two “very tough” matters are still unresolved, particularly the status of Ukrainian territory in the eastern Donbas region, which Russia annexed after its full-scale invasion in 2022. He noted that discussions are moving toward a U.S. proposal for a “free economic zone” in parts of the region, potentially involving a Ukrainian military withdrawal, though no agreement has been reached.

Zelenskiy reiterated that any territorial decisions must be made by Ukrainians themselves, suggesting that aspects of the peace plan could ultimately be decided through public referendums.

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