To read the full report, please download the PDF above.
Executive summary │ Russia-Ukraine resolution prospects
Parameterising scenarios and the implications for global markets
Russia-Ukraine stylised scenarios
Implications of a potential peace deal on the macro and commodities complex
With the world’s attention laser focused on the promising US-Ukraine accord for a 30 day ceasefire proposal during deliberations in Saudi Arabia this week, we offer in this thought leadership report an examination of what a Russia-Ukraine peace deal may signal for global markets, with a focus on the implications for macro and the commodities complex as well as energy, utility and power companies.
We do not take a view on the course of the Russia-Ukraine war or if/how it may be resolved, but recognise market expectations surrounding a resolution is growing following the re-election of US President Trump.
Given the complex degree of uncertainties, we draw on scenario analysis on what may transpire:
- Destabilising ceasefire (base case, 60% probability). US-Russia talks yield an unstable ceasefire in Ukraine, albeit based on US-Europe collaboration, enabling a weak security guarantee for Ukraine.
- US wins, Russia wins, Ukraine undermined (25% probability). Ceasefire at expense of Europe/Ukraine.
- No deal, more escalation (15% probability). No ceasefire and the war continues.
Based on our scenario analysis, we offer an examination of what a peace deal may signal for global markets:
- Economic growth. Modest ~0.2% Euro Area GDP increase in our base case given fragile state of affairs.
- Inflation and rates. Scale of lower gas prices matters but ECB to look past any mechanical inflation drop.
- Trade. Energy importers with geographical proximity to the war will gain most (CEE region, Turkey).
- Natural gas. Most critical commodities channel – easing sanctions, higher Russian supply, lower prices.
- Crude oil. Limited boost to Russian supply as production constrained by OPEC+ strategy, not sanctions.
- Gold. Even if Russia’s bullion reserves are unfrozen, the 2022 freeze precedent has reshaped minds.
- Base metals. Aluminium and nickel production remained stable post-war, whilst palladium is unsanctioned.
- Energy companies. Russian stakes (BP – Rosneft, TotalEnergies – Novatek) gain, as does OMV, Equinor.
- Utilities/power companies. Generation companies and renewables underperform on low power prices.