By Esther Ososanya
Global markets are watching closely as U.S. President Donald Trump and Russian President Vladimir Putin meet in Alaska later on Friday to explore a possible ceasefire agreement in Ukraine.
The war, now Europe’s biggest conflict since World War Two, has upended energy markets, driven food prices to multi-year highs, battered European assets, and forced Russia into deeper economic isolation from the West.
Details of the Alaska deal and how long any ceasefire might hold will be critical.
“The big issue will be, of course, that even if we get a ceasefire, how sustainable is that?” noted Guy Miller, chief markets strategist at Zurich Insurance Group.
1. Europe Hurts, Defence Stocks Surge
Europe’s heavy reliance on cheap Russian gas left its economy and markets highly vulnerable when the war disrupted supply chains. Germany’s industrial powerhouse stalled, while energy-dependent sectors such as chemicals and manufacturing faced sharp cost increases.
European equities, represented by the STOXX 600 index, fell sharply in the early months of the conflict. Banking shares, particularly those exposed to Russian operations, were hit hard but later recovered as institutions cut ties with Moscow.
It wasn’t all negative: aerospace and defence stocks saw explosive growth. Since February 2022, Italian defence contractor Leonardo’s shares surged over 600%, while Germany’s Rheinmetall jumped more than 1,500% as governments boosted military budgets.
“If the fighting stops in Ukraine, I’d expect defence stocks to come off a little bit, but the fundamental reason why defence stocks have rallied is still there,” said Toni Meadows, Chief Investment Officer at BRI Wealth Management. “If Putin is still there and Trump is still there, then the need for Europe to spend on defence is still there.”
2. Energy Shock Redefined Supply Chains
The invasion sparked one of the sharpest energy price shocks in decades. Brent crude oil jumped nearly 30% to $139 per barrel at its peak, while European natural gas prices, tracked by Dutch TTF futures, skyrocketed almost 300% to record highs.
Europe scrambled to replace the Russian gas that once accounted for more than 40% of its demand, turning heavily to U.S. liquefied natural gas (LNG). Under a new trade deal with Washington, the EU pledged to increase annual purchases of U.S. crude, gas, and coal from $75 billion in 2024 to $250 billion by 2027 a target analysts widely consider unrealistic.
Although oil and gas prices have since eased from 2022 peaks, they remain elevated oil up 50% and gas up 300% compared with five years ago.
3. Inflation Spiral and Policy Shift
The war compounded post-COVID-19 supply disruptions, pushing global inflation to levels not seen in decades. Energy and food prices soared, with agricultural exports from Ukraine and Russia two of the world’s top grain suppliers severely disrupted.
Initially, central banks described the price spike as “transitory,” but the persistence of inflation forced aggressive interest rate hikes in major economies. Since late 2022, inflation and borrowing costs have eased, but food prices remain stubbornly high, particularly for emerging markets.
According to the UN Food and Agriculture Organization, global food commodity prices in July hit their highest level in more than two years. “If Ukraine could operate normally as an economy, that would help food prices around the world,” said April LaRusse, head of investment specialists at Insight Investment.
4. Diverging Fortunes for Ukraine and Russia
Ukraine’s economy has been severely weakened by the conflict, leading to a restructuring of $20 billion in government debt last year. Investor sentiment briefly improved on expectations that a Trump-led peace deal could stabilise the country, but tensions between Trump and Ukrainian President Volodymyr Zelenskiy culminating in February’s tense Oval Office meeting — drove bond prices back down.
READ ALSO:Trump, Putin Set to Meet Amid Looming White House Deadline on Ukraine
Russia, meanwhile, endured a deep contraction after Western sanctions took effect, but massive defence spending in 2023 and 2024 fuelled a rebound. The rouble collapsed in early 2022 but later surged to seven-year highs as imports dried up and capital controls took hold. It has gained nearly 40% against the dollar this year.
Russian trade has increasingly shifted toward China, with the yuan overtaking the dollar as Moscow’s most-traded foreign currency.
5. Currency Realignment and De-dollarisation
The euro fell almost 6% against the dollar in 2022 as Europe absorbed the economic shock. Analysts say a ceasefire could lift sentiment slightly, but monetary policy remains the bigger driver of exchange rates.
While the U.S. dollar and Swiss franc benefited from safe-haven demand early in the war, the conflict also accelerated a longer-term shift: “de-dollarisation.” The freezing of $300 billion in Russian state assets by the West in 2022 prompted several countries to explore alternatives to the dollar for trade and reserves, with the yuan’s role expanding sharply in Russia’s economy.
The Alaska talks could mark a turning point or prove to be a brief pause in Europe’s largest conflict in decades. Markets will be watching closely not only for an agreement, but for signs it can hold.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
