The spatial dimension of conflict and economic resilience: a gravity analysis of the Russia-Ukraine war’s impact on the EU across GDP, inflation and macroeconomic indicators

Building on Isard’s theories on the relationship between distance and trade flows, this study analyses how economic and geographic proximity shape commercial interactions, despite widespread beliefs that globalization has diminished the relevance of distance. Using an enhanced theoretical framework, this research explores how the location and intensity of armed conflicts affect market behaviour. The gravitational field model is applied both to aggregate trade flows and to place-level economic activity through a city-weighted distance measure, capturing local exposure to conflict. The study argues that distance – whether physical, economic, or political – remains a critical determinant of trade, and that conflict magnifies its effects. Focusing on the context of the 2022 Russia-Ukraine war, we find a robust proximity penalty for GDP growth, while evidence for inflation is more nuanced and becomes attenuated once energy and trade controls are included. Complementary analyses highlight fiscal, labour-market, and financial-market channels, showing more heterogeneous effects often mediated by policy responses.