A potential long-term peace agreement between Russia and Ukraine, guaranteed by key international powers and involving the gradual removal of sanctions on Russia, would represent a seismic shift in the geopolitical and macroeconomic landscape. Recently, the narrative about signing such an agreement has been growing, so it would be logical to consider how this would affect popular assets.
FX Market Reaction
US Dollar (USD):
The US dollar has served as a safe-haven asset amid global tensions. A credible peace deal would reduce geopolitical risk premiums, dampening demand for the dollar in favor of higher-yielding and risk-sensitive currencies.
Outlook:
- The US Dollar Index (DXY) will likely decline by 1.5–3% in the short term.
- Increased appetite for carry trades, favoring currencies like GBP, AUD, and JPY.
Euro (EUR):
The euro stands to benefit significantly. Europe has borne the economic brunt of the war – through energy shocks, inflationary pressures, and trade disruptions. Peace and sanctions relief could revive industrial output and consumer confidence.
Outlook:
- EUR/USD could rally toward 1.14–1.15.
- Reduced recession risk in the Eurozone, particularly in Germany and Italy.
Equity Markets
European Equities: DAX (DE40), CAC 40 (FR40), Euro Stoxx 50 (EU50)
Peace and energy price normalization would trigger a strong risk-on rally in European equities. Cyclical sectors – especially autos, chemicals, and industrials – would likely lead to gains.
Outlook:
- DAX and Euro Stoxx 50 could surge 5–8% in the weeks following a deal.
- Lower equity risk premiums and improved EPS forecasts.
US Equities: S&P 500 (US500), Nasdaq (US100), Dow Jones (US30)
The impact on US markets would be more muted. Investors may rotate into undervalued European and emerging market assets. However, lower global risk could support broader risk sentiment, benefiting US exporters.
Gold (XAU/USD)
As geopolitical risk fades, safe-haven flows into gold may decline. Investors may reallocate capital from precious metals to risk assets.
Outlook:
- Gold prices may fall 3–6% short term.
- Key technical support levels: $3,200 and $3,000 per ounce.
Oil Markets (Brent, WTI)
The oil market reaction would be twofold. Sanctions relief could increase the Russian oil supply, pushing prices down. However, improved global sentiment and trade normalization may boost demand.
Outlook:
- Brent may drop below $60 initially before stabilizing.
- Volatility will likely increase as markets reassess supply-demand dynamics.
Europe’s Political and Economic Response
Major Western European economies – Germany, France, Italy – would welcome the deal, particularly allowing them to re-engage economically with Ukraine and Russia. However, political divisions within the EU could complicate the sanction’s rollback. Central and Eastern European nations may remain cautious or resist swift normalization with Russia.
Asset Impact Summary
| Asset | Expected Direction | Comment |
| USD (DXY) | ↓ Slight to moderate | Reduced safe-haven demand |
| EUR/USD | ↑ Strong | Growth optimism |
| European Indices | ↑↑ Strong | Industrial rebound, earnings optimism |
| US Indices | ↔/↑ Mild upside | Global trade boost, rotation to value |
| Gold | ↓ Moderate | De-risking flows, shift to equities |
| Oil | ↓ Then ↔ | Higher supply vs. improved demand |
European Equities Comeback
A lasting peace agreement would be a powerful catalyst for global risk assets. The euro and emerging market currencies would appreciate, while the dollar and gold would face headwinds. European equities could enter a revaluation phase, while commodity markets – especially oil – would experience short-term volatility. Still, execution risk remains critical. Market reactions will depend on the deal’s credibility, the pace of sanctions relief, and coordinated responses from NATO, the EU, and G7 economies.