The War Everyone Forgot
With Iran dominating headlines, the Russia-Ukraine conflict has faded from front pages. But it hasn't faded from markets. The war continues to influence energy prices, grain markets, defense spending, and global supply chains. Ignoring it is a mistake.
Energy Impact
European natural gas prices remain elevated compared to pre-war levels. Russia's pipeline gas to Europe is essentially gone — permanently. LNG imports from the US, Qatar, and Australia have replaced it, but at higher cost. This structural shift means European energy costs stay elevated for years, benefiting US LNG exporters (Cheniere Energy, New Fortress Energy) and hurting European manufacturing competitiveness.
Defense Spending Boom
NATO members are rushing to meet 2% GDP defense spending targets. Many are exceeding it. Poland is spending 4% of GDP on defense — the highest in NATO. This is a multi-year procurement cycle: fighter jets, ammunition, naval vessels, and especially drones and electronic warfare systems. Defense stocks have years of runway ahead.
Grain and Food Prices
Ukraine was the "breadbasket of Europe" — a major exporter of wheat, corn, and sunflower oil. While the Black Sea grain corridor has partially reopened, exports remain below pre-war levels. Combined with climate disruptions, food prices globally remain elevated, disproportionately affecting developing nations and contributing to geopolitical instability.
The Ceasefire Question
Markets would rally significantly on a credible ceasefire. The challenge: neither side has incentive to stop fighting under current conditions. Russia holds 20% of Ukraine's territory. Ukraine won't accept permanent loss. Watch for: 1) Trump administration diplomatic pressure, 2) Russian economic strain from sanctions, 3) Ukrainian battlefield conditions through spring/summer 2026.
