CO oxidation on Ru(0001) is a long-standing example of a reaction that, being thermally forbidden in ultrahigh vacuum, can be activated by femtosecond laser pulses. In spite of its relevance, the precise dynamics of the photoinduced oxidation process as well as the reasons behind the dominant role of the competing CO photodesorption remain unclear. Here we use ab initio molecular dynamics with electronic friction that account for the highly excited and nonequilibrated system created by the laser to investigate both reactions. Our simulations successfully reproduce the main experimental findings: the existence of photoinduced oxidation and desorption, the large desorption to oxidation branching ratio, and the changes in the O K-edge X-ray absorption spectra attributed to the initial stage of the oxidation process. Now, we are able to monitor in detail the ultrafast CO desorption and CO oxidation occurring in the highly excited system and to disentangle what causes the unexpected inertness to the otherwise energetically favored oxidation.