The price of peace: How a Russia-Ukraine ceasefire could reshape global markets

A flurry of international attention has now been redirected to the Russo-Ukrainian War as US President Donald Trump engaged in direct peace talks with European leaders and Ukrainian President Volodymyr Zelensky, following his summit in Alaska with the Russian President Vladimir Putin. While Trump pressed for a peace framework backed by NATO-type security guarantees, Zelensky and Europe insisted that Ukraine’s territorial integrity and consent are non-negotiable.

Equites: From discount risk to relief rally

A peace deal is expected to instigate a shift especially across European equity markets. Regional indices like the STOXX Europe 600 are deeply undervalued relative to global peers, having carried a persistent geopolitical risk premium since 2022. European banks, manufacturers, transport and logistics firms (especially those in Eastern and Central Europe) stand to benefit most from reduced geopolitical risk. Energy costs are likely to ease, relieving margin pressures. Markets such as Austria, Germany, and France – with significant Eastern European exposure, are particularly well-positioned for upside.

In the US, markets may see modest gains as global tail risks recede. However, the rally would likely be more selective. Tech could outperform, especially if peace is interpreted as disinflationary, giving central banks room to ease. Defence and military suppliers may see a pullback after years of elevated performance, while consumer sectors could regain capital inflows.

This sentiment shift would echo past events: post-Gulf War or Iran Deal easing, for example, where risk assets surged but only sustained momentum with macro follow-through. In this context, realistic expectation-setting is crucial and will be priced into investment strategies.

Bonds and credit: Curve compression while easing pressure

The European treasury markets will likely see repricing. Yields across the Eurozone could fall as geopolitical risk premia begin to disintegrate. Investors would likely then re-enter markets previously considered exposed, driving up bond prices and flattening curves.

In corporate credit, spreads on European investment-grade and high-yield bonds, especially those tracked by the iTraxx Europe index, could compress sharply. Naturally, war-related default risks (with a specific focus on CEE-oriented banks) and improved creditworthiness would reprice risk throughout the continent.

Central banks would not be immune, however. The ECB might interpret peace as a green light for earlier-than-expected rate cuts if disinflation accelerates. For the FED, the formula is more complex, but a global disinflationary impulse combined with improving financial conditions could support a dovish tilt. Markets may also reassess inflation-linked bonds. Breakeven rates would likely decline, reflecting lower expectations for supply shocks and food/energy-driven inflation.

Options and volatility: Repricing in real time

Volatility markets tend to move faster than fundamentals and in the event of peace, the reaction would be swift. There is an expectation of sharp declines in implied volatility for equity indices such as the VIX, although some risk may still be priced as a result of the tariff-related volatility spike that pushed the VIX to $52 in April. This will, however, be more prevalent in commodity volatility indexes tied to energy. Hedging demand would collapse in the short term as risk-off positioning unwinds.

Traders may need to close out defensive plays, which includes deep out-of-the-money puts, and rotate toward bullish call spreads, especially in sectors like financials, infrastructure, and European ETFs. Structured products could also make a comeback, particularly those designed for yield in low-volatility environments. This shift could reignite demand for delta-neutral strategies and relative value volatility arbitrage.

With institutional volatility sellers back in play and tail hedgers retreating, the post-peace period could usher in a new low-volatility regime, at least temporarily, until the next macro or geopolitical shock re-prices risk. With the current global situation, this seems highly likely.

Financial institutions: The biggest winners

Few sectors stand to gain more from peace than banks and financial institutions, especially those across Europe.

For nearly three years, European banks have operated under extreme caution: curbing lending, raising reserves, and weathering high funding costs due to the war’s effects on energy prices and macro uncertainty. A credible peace deal can reverse that climate faster than expected.

• Loan growth would accelerate, especially in CEE and reconstruction-related sectors.
• Provisioning would ease, boosting profitability.
• Capital markets activity such as M&A, syndicated loans, and cross-border financing, may also rise.

Banks such as Société Générale (France), and UniCredit (Italy) could lead the rebound, given their presence in the region. Investment banks could benefit from deal flow in infrastructure, energy, and reconstruction – though many may move cautiously if sanctions persist.

As for Russian banks, reintegration into SWIFT or restoration of correspondent banking ties is a major unknown. Even with a ceasefire, many sanctions will likely remain unless tied to a broader political shift in Russia. Investors might treat Russian financial assets as a long-tail optionality play and not a base case. Easing sanctions on Russian financial institutions is likely to take longer – though in today’s fluid geopolitical climate, timelines remain uncertain.

Commodities: A brief note on oil & gold

Beyond the initial market reaction (likely a sharp but short-lived dip), oil may still face a more medium-term downside if Russian crude re-enters global markets freely. OPEC+ is likely to adjust quotas to manage supply and protect price floors, but the true outcome is yet to be seen. Additionally, risk is already priced in with respect to the crisis in the Middle East though the long-term implications of that situation remain unclear.

Gold, as the traditional safe haven, would lose some geopolitical demand. But its longer-term drivers — inflation, rates, and currency debasement fears — will remain in play.

In short, peace won’t fully “solve” commodity markets, but it will shift the volatility narrative away from war-risk premiums at least where priced in.

Conclusion: The beginning of a new risk regime

A peace deal between Russia and Ukraine would reset global financial markets — not just geopolitically, but structurally. We’d see:

• Equity re-ratings across Europe
• Bond yields fall and curves flatten
• Volatility would compress across asset classes
• Banks and credit markets revive

Yet peace doesn’t always mean stability.

Frozen conflict scenarios, lingering sanctions, and geopolitical reshuffling (NATO enlargement, Russia-China ties, Iran Nuclear Deal) will continue to shape macro risk. The durability of peace — and how markets perceive it — will matter as much as the announcement itself.

Still, for investors and institutions, peace isn’t just the end of war. It’s the start of a new market regime — one where risk is redefined, capital is reallocated, and opportunity returns to corners of the financial system long written off.

Explore the impact of geopolitical shifts on financial operations at RiskMinds International, 17-20 November 2025.