**Market Update: Geopolitical Risks Surge Amid Ongoing Russia-Ukraine Conflict**

On May 22, 2025, U.S. President Donald Trump shared a concerning insight during a private meeting with European leaders: according to his conversations, Russian President Vladimir Putin believes he has the upper hand in the war in Ukraine and has no plans to de-escalate in the near term. This statement has amplified investor concerns about prolonged geopolitical instability, sending ripples through global energy and financial markets in recent days.

Following the news, international oil prices surged. Brent crude futures briefly reached $89 per barrel, marking a three-week high. This reflects growing anxiety over extended conflict and its potential impact on energy supply chains. Meanwhile, OPEC’s recent announcement to increase production failed to ease these concerns. Complicating matters further, Russia is reportedly exporting oil to Asia at discounted rates via informal shipping routes, muddying the supply-demand outlook. The market remains highly uncertain about where oil prices are headed next.

Investors are also turning to safe-haven assets. Gold prices jumped during the Asian session, hitting $3,319 per ounce—just shy of this month’s record high. With little diplomatic progress and the conflict dragging on, capital is flowing into non-yielding assets viewed as more stable. Unsurprisingly, gold’s appeal continues to rise.

In Europe, defense stocks are showing strength. German arms manufacturer Rheinmetall has seen substantial gains this year, and France’s Thales has also posted notable growth. Their momentum ties directly to the EU’s recently announced European Defence Investment Program, which earmarks tens of billions of euros to boost military capacity and regional defense autonomy. Markets increasingly expect that under Russian pressure, the EU will accelerate defense spending, supporting long-term growth in the sector.

Earlier this year at the World Economic Forum in Davos, Trump publicly suggested that pushing down oil prices could pressure Russia back to the negotiating table. His current private assessment, however, seems at odds with that strategy. As the U.S. enters a new election cycle, this contradiction adds uncertainty to future American energy and foreign policy, with global commodity markets hanging in the balance.

Within the EU, debates continue over how best to support Ukraine. While leadership calls for stepped-up military aid, division remains—Hungary, for example, has openly opposed using the European Peace Facility to fund arms shipments. On top of this, Russia this week abruptly cut off gas supplies to Austria via Ukrainian pipelines, citing “technical issues.” This incident highlights Europe’s continued vulnerability in energy security and renews fears about the long-term reliability of its transition strategies.

Attention now turns to the NATO summit in June, where discussions are expected to focus on fairer burden-sharing in defense spending. Germany has already pledged over €100 billion for military modernization, catalyzing Europe’s drive for strategic autonomy while providing a boost to relevant sectors in the equity markets.

In short, a single off-the-record remark from President Trump may be accelerating major shifts in European policy and investor sentiment. With geopolitical tensions unlikely to ease anytime soon, staying agile and revisiting asset allocations will be key for market participants in the months ahead.