European defense stocks dropped after Trump said Ukraine-Russia peace talks were 95% ready, sparking fears of reduced defense spending.

European defense stocks fell sharply on Monday after former U.S. President Donald Trump said peace talks between Ukraine and Russia were "95% ready," citing progress from a meeting with Ukrainian President Volodymyr Zelensky and a prior call with Russian President Vladimir Putin. The STOXX Europe Aerospace & Defense Index dropped 1.8%, with major firms like Leonardo, Rheinmetall, and BAE Systems seeing losses. Markets reacted to concerns that a peace deal could end the surge in defense spending and production that has driven strong revenue growth since the war began. Kremlin spokesman Dmitry Peskov acknowledged talks were in a final phase but said no full briefing had yet occurred between Trump and Putin. Despite optimism, key issues remain unresolved, including Ukraine’s territorial claims, and no formal agreement has been reached.