Russia ‘has not won’ as Ukraine war enters fifth year, Zelenskyy says

Ukraine marked the fourth anniversary of Russia’s 2022 invasion as President Zelenskyy declared Russia has “not won,” while the conflict continues to inflict heavy human and territorial costs; Russia controls about 19.5% of Ukrainian territory and made a 0.79% territorial gain over the past year. Western leaders pledged continued political, military and economic support, including an EU-backed 90-billion-euro loan that remains blocked by Hungary, as peace talks mediated by the US remain deadlocked over territory and security guarantees. Independent estimates cited include up to two million combined casualties by spring and a CSIS estimate of 325,000 Russian soldier deaths through Dec 2025, underscoring prolonged attrition that sustains upside risks for defense and energy markets and keeps macro and geopolitical uncertainty elevated.

Analysis

Market-structure: The protracted conflict structurally benefits defense contractors, energy producers (especially LNG suppliers) and strategic-miner miners while hurting Ukraine-facing European utilities, EM exporters tied to Ukraine/Russia trade, and insurers. Expect defense order backlogs to lift revenues by mid-2026 (+10–20% consensus upgrade risk for top suppliers) while European gas demand supports LNG price floors and capex for shipping and storage through 2026–27.

Risk assessment: Tail risks include a NATO entanglement or tactical nuclear/cyber escalation (low probability, high impact) that would spike oil >$100 and create 10–15% equity selloffs; conversely a credible peace deal would compress defense multiples by 20–30%. Near-term (days–weeks) drivers are spring offensives and EU internal politics (Hungary vote on the €90bn loan in 30–60 days); medium-term (3–12 months) is munitions/industrial capacity and sanctions regime shifts.

Trade implications: Defensive overweight in US defense names and energy producers with 3–6 month horizons, hedge with FX (long USD via UUP) and gold (GLD) to offset geopolitical premium; use call spreads to cost-effectively capture event-driven upside into spring. Short concentrated European macro exposures (Eurostoxx/sovereign-duration, select utilities) where gas passthrough and fiscal burden remain unresolved.

Contrarian angles: Consensus assumes endless drawdown — but production bottlenecks for munitions and shipborne LNG capacity mean upside to suppliers is underpriced; however, defense equities may be capped if Western budgets pivot to domestic spending cuts. Watch proximate data: Russian territorial gains >1% month-over-month or oil >$90 should trigger re-risking; EU approval of the €90bn loan would be a clear de-risking event.

Key Decisions for Investors

• Establish a 2–3% long position split between RTX (Raytheon, ticker RTX) and LMT (Lockheed Martin, ticker LMT) funded by reducing European cyclical exposure by 2% (short FEZ/SPDR EURO STOXX 50 ETF) — target a 3–6 month holding period; trim if defense order backlog revisions lag >10% consensus.
• Add a 2% long in energy majors (XOM and CVX, 1% each) and a 1% long in GLD to hedge commodity upside; scale in if Brent >$85 or European TTF gas rises >30% vs last 90-day average, exit/hedge if Brent drops below $70.
• Buy 3–6 month ATM call spreads on RTX or LMT (buy 0.5–1.0 delta calls, sell 0.7–0.8 delta) sized to equal a 1% notional upside exposure to limit premium; target break-even on a 10–20% equity move higher into the expected spring offensive window.
• Reduce duration by 50–100bps portfolio exposure to European sovereigns and increase USD liquidity (UUP ETF +1–2%) ahead of the EU loan vote (30–60 days); reallocate proceeds if the €90bn loan is approved to selectively add EM-exposed defense/energy names.
• Short-select European utilities/energy retailers via 1% put positions (e.g., 3-month ATM puts on large-cap Euro utilities) to capture continued pass-through risk and winter-grid vulnerabilities; close if Russia stops offensive operations for >30 consecutive days or gas flows normalize.