Three Charts on Markets as the Ukraine War Turns Three

Three years ago Monday, Russian President Vladimir Putin sent his troops to invade Ukraine, kicking off a grueling war that rages to this day. You have no doubt seen the retrospectives on the tragic toll to lives and property, as well as the prospect of peace talks and the fighting finally reaching an end, with opinions and emotions running hot on the subject from myriad perspectives. Terrible as the images and losses are, we set these aside and focus where stocks do, as always, on the economic and market-related aspects. And this three-year mark is a time to check in and re-learn the lesson that markets got over the initial shock quickly.

Unlike most regional conflicts, the war in Ukraine contributed to a bear market. Not because the war itself was sweeping and destructive enough to rattle stocks as WWII’s onset did, but because it joined and spawned a host of fears that stung investors like a swarm of bees throughout 2022. There were fears of broader European war. Worries over the global economic effect of sanctions and Russian retaliation—including oil and natural gas supply disruptions. Shortage fears caused energy prices to spike, which contributed to inflation fears and rate hike fears. All cycled in and out of headlines. Yet all faded as the war ground on.

Exhibits 1 – 3 show this with global oil prices, benchmark eurozone natural gas prices and the S&P 500. As the tanks rolled in and the West fought back with sanctions, the world worried all Russian oil would go off the market, sending Brent crude prices above $130 early that March. Natural gas prices stayed relatively tame in the US, but they hit the stratosphere in Europe as Russia used its pipeline dominance as leverage and the region scrambled to fill reserves and lock in new suppliers. And stocks grinded lower over the next seven and a half months. Yet in all cases, the pain didn’t last.

Exhibit 1: Oil Prices and Ukraine

Source: FactSet, as of 2/24/2025. Brent crude oil price, 6/30/2021 – 2/21/2025.

Exhibit 2: Eurozone Natural Gas Prices and Ukraine

Source: FactSet, as of 2/24/2025. Dutch TTF gas price, 6/30/2021 – 2/21/2025.

Exhibit 3: Stocks and Ukraine

Source: FactSet, as of 2/24/2025. S&P 500 total return index, 6/30/2021 – 2/21/2025.

Here is something else that may jump out at you with oil and natural gas in particular: Markets didn’t wait. They started pricing supply shortage fears before the war. In natural gas’s case, it went back to autumn 2021, when cold weather and becalmed winds caused demand for gas heating to spike. And now? Eurozone natural gas prices aren’t just below pre-invasion levels, they are below late-2021 freakout levels. And they haven’t had such massive spikes since. Supply stabilized as the bloc forged new relationships with US, Middle Eastern and North African producers. New import terminals and other infrastructure came online. When a cold snap resurrected fears earlier this winter, prices barely budged relative to late 2021 or early 2022.

Oil, meanwhile, bounced around its pre-war range as supply and demand growth played tug of war. Russian oil ended up staying on the market despite Western leaders’ efforts to block it. So-called “shadow tankers” continued evading sanctions’ and price caps’ reach, and the world had all the oil it needed. The fact that Western leaders are still trying to block Russian oil should tell you all you need to know about how reality went relative to everyone’s fears.

And stocks? They bottomed that October 12, with a new bull market beginning the next day. Boom years followed in 2023 and 2024, and the party doesn’t look set to end any time soon. Even with Europe leading year to date (and likely through the year, in our view), US stocks look well positioned, just with fewer false fears to lift them than stocks across the pond seem to have.

Note, too, that this is why we doubt the war’s end, if or when it arrives, is some massive bullish driver. Stocks already moved past the conflict’s economic effects. That is a very cold thing to say but also in keeping with their forward-looking nature. And if the war couldn’t sink stocks for long, then it stands to reason that its end should have similarly muted effects. The world has long since seen that its economic effects are still too localized and too small, relative to the entire global economy, to matter much to corporate earnings across the developed world.