Rising European Defense Stocks Amid Trump-Zelensky Discord... Spreading Security Concerns

Trump Considers Halting Military Support for Ukraine
European Defense Stocks Soar on Prospects of Increased Orders

On the 28th of last month (local time), U.S. President Donald Trump (right) and Ukrainian President Volodymyr Zelensky (left) held a summit meeting. The negotiations ended in failure as differences over the ceasefire talks and mineral agreements could not be resolved. Photo by UPI and Yonhap News Agency

As ceasefire negotiations and mineral agreements between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky broke down, investment sentiment has surged in European defense stocks. The possibility that the Trump administration might withdraw military support for Ukraine has raised expectations that European defense companies will see a sharp increase in weapons orders.

However, concerns have also emerged that the sharp rise in defense spending by European countries could negatively impact the European economy in the future. This could affect the European Central Bank's (ECB) policy, which is considering additional interest rate cuts amid fears of an economic recession and the fallout from the U.S. tariff war.

Trump-Zelensky Rift Deepens: "Zelensky Does Not Want Peace"

On the 2nd (local time), Ukrainian President Volodymyr Zelensky (left) and UK Prime Minister Keir Starmer (right) held a summit meeting. President Zelensky visited the UK to discuss ceasefire negotiations immediately after talks with US President Donald Trump broke down. Photo by UPI and Yonhap News.

According to CNN on the 3rd (local time), President Trump strongly criticized President Zelensky on his social media platform Truth Social, saying, "Zelensky does not want peace as long as he has U.S. support," and "The United States will no longer tolerate it."

The previous day, President Zelensky stated in a meeting with European leaders that "the end of the war between Ukraine and Russia is still very far away," which provoked a strong backlash from President Trump. Trump called it "the worst statement Zelensky has made" and criticized it as "not a good statement if seen as a way to show strength to Russia."

The two leaders held a summit at the White House on the 28th of last month, but all negotiations, including the ceasefire talks and the previously planned Ukraine mineral agreement, collapsed, fueling rumors of discord. Moreover, President Trump announced that he would discuss follow-up measures related to the mineral agreement breakdown, raising the possibility that the Trump administration might withdraw military support.

European Defense Stocks Surge in Unison... Expectations for Increased Weapons Orders

As the rift between President Trump and President Zelensky deepened, European defense stocks surged sharply. On the 3rd, Germany's largest defense company, Rheinmetall, soared 13.71% to 1,144.50 euros, reaching an all-time high. British defense company BAE Systems (14.54%) and Italy's Leonardo (16.13%) also saw double-digit gains.

In the case of Rheinmetall, its stock price rose a staggering 138% compared to 480.30 euros on November 5th last year, the day of the U.S. presidential election. This was because the Trump administration, after taking office, began ceasefire negotiations by largely accepting Russia's demands to quickly end the Ukraine war, increasing security threats. The victory of the Christian Democratic Union (CDU)?Christian Social Union (CSU) coalition in the German federal election on the 23rd of last month, which is considering increasing defense spending, has also raised expectations for benefits to defense companies.

Friedrich Merz, leader of the CDU and the likely next Chancellor of Germany, emphasized at a press conference after the election victory, "We must fundamentally reorganize the security system and end decades of dependence on the United States," adding, "My highest priority is to strengthen Europe as soon as possible and gradually achieve true independence from the United States."

Shaken European Economy... Is an Interest Rate Cut Possible?

Reuters·Yonhap News

Concerns are also rising that the trend of increasing defense spending by European countries could adversely affect the European economy. Along with the impact of the Trump administration's tariff war, increased defense expenditures could raise government debt levels, putting pressure on the ECB's interest rate policy.

International credit rating agency Fitch recently warned in a report that "if NATO European member countries increase defense spending to around 3% of GDP, many countries will have to raise their debt ceilings to finance defense spending and increase taxes," adding, "Increased debt in the medium to long term could affect sovereign credit ratings."

The New York Times (NYT) also pointed out, "If Europe fails to properly finance Ukraine's defense costs, it will have no choice but to accept a ceasefire agreement favorable to Russia, which will further increase European security concerns," and "European countries have no choice but to increase defense spending, but currently Europe is facing growing fears of economic slowdown, and the ECB is considering additional interest rate cuts. Massive increases in defense spending could become a major obstacle to future accommodative monetary policy."

This content was produced with the assistance of AI translation services.