Markets Rattle As Trump, Zelenskiy Clash in Heated White House Meeting

The two leaders engaged in a public war of words before the press, prompting a flight to safe-haven assets as investors weighed the implications for a potential peace deal with Russia.

"It’s disturbing," said Jack McIntyre, portfolio manager at Brandywine Global. "It looked like we were moving towards progress on a peace deal or a ceasefire between Russia and Ukraine, and maybe now that gets to come on hold, so you have to price in a little bit more uncertainty."

Zelenskiy’s visit to Washington was intended to solidify US support for Ukraine and counter Russian President Vladimir Putin. Instead, he found himself at odds with Trump and Vice President JD Vance over the war, underscoring Kiev’s struggle to maintain US backing. Trump later accused Zelenskiy of showing disrespect toward the United States.

US Treasury yields dropped following the confrontation, with benchmark 10-year yields falling to 4.23% from 4.27% earlier in the day. European stock futures declined, with Germany’s DAX and France’s CAC40 each down 0.6%, while the EuroStoxx 50 slid as much as 1.4% before recovering slightly. Wall Street was volatile, with the S&P 500 (.SPX) last up 0.58%. The euro touched a two-week low of $1.036 before rebounding to $1.0366.

The tense meeting came as investors braced for potential US tariffs, with Trump confirming on Thursday that his administration would impose 25% duties on Mexican and Canadian goods starting March 4, along with an additional 10% tariff on Chinese imports.

"The unconventional nature of (the exchange) raised the issue for investors of how unpredictable and uncertain the Trump administration can be," said Rick Meckler, partner at Cherry Lane Investments.

"There are so many things happening in this government at once—all of which are to some extent groundbreaking—and this just added one more feature to it. So that's where the market (took a) leg down a little bit, thinking this is just a sign of a lack of predictability and more traditional approaches to diplomacy," he added.

Market sentiment was already fragile after a key report closely watched by the Federal Reserve indicated a slowdown in consumer spending. Weak consumer confidence, sluggish manufacturing, and disappointing retail and home sales have fueled a bond rally in recent weeks.

Still, some investors saw reasons for optimism.

"Apart from the theatrics, not much changed today from a market standpoint. The good news is that Trump didn't walk away from the deal completely," said Jamie Cox, managing partner at Harris Financial Group, referring to a US-Ukraine agreement on rare earth minerals that was expected to be signed as part of a broader peace deal with Russia.