Now that tensions in the Middle East have calmed down somewhat — although long-term peace remains highly uncertain, which explains why gold prices have not fallen much following the news — the US president's attention seems to have shifted to another major conflict: the one between Russia and Ukraine.
So, should we expect a miracle anytime soon?
Despite the recent uptick in communications between Moscow and Washington, there is little real progress to show for it. Even the face-to-face meeting between the two presidents in Alaska failed to yield significant progress, as the positions of both sides of the conflict regarding the peace agreement remain far apart.
With regard to the territorial dispute, Russia's demands have not changed much in recent months. It continues to insist on controlling the entire Donetsk region and, although it has reportedly offered minor concessions regarding parts of the Zaporizhzhia and Kherson regions, Ukraine has flatly rejected such terms.
The issue of neutrality has also seen little progress. Russia continues to demand that Ukraine stay out of NATO, maintain a cap on the size of its armed forces, and adopt a fully neutral and demilitarized status. Ukraine, for its part, insists on its sovereign right to choose its own alliances and host foreign troops if it so desires.
In short, the prospects for peace remain as bleak as ever. Unsurprisingly, the Russian stock market continues to feel the pressure. The news that the long-awaited meeting between Foreign Minister Lavrov and US Senator Marco Rubio, scheduled for this week, has been postponed has only added fuel to the fire.
No wonder European defense companies such as Thales and Rheinmetall have seen their shares rise again. And judging by the latter's plans to expand munition production, peace does not seem to be just around the corner. That also means that demand for so-called “defensive” assets could remain strong for some time.
And what about the US stock market?
If the war in Ukraine drags on, it is unlikely to put significant pressure on the S&P 500 or Nasdaq; we have seen that pattern before. However, if a ceasefire or peace agreement were to happen, we might see a temporary boost in risk appetite, driven more by speculation than by any real shift in fundamentals.
For the impact to be truly lasting, trade and financial flows between Russia and the U.S. would need to recover. In the meantime, the U.S. market remains strong, driven by the enthusiasm for AI. However, even the IMF has described this trend as a potential bubble, suggesting that investors should proceed with caution.
