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The United States and Russia are in talks in Riyadh, Saudi Arabia, which began on Tuesday to initiate negotiations on ending the war between Russia and Ukraine. The ongoing peace talks will not only have impacts on global politics but also on financial markets.
However, before the negotiations, the European Union affirmed its support for Ukraine, while Ukraine rejected any agreement made on its behalf, as the talks are exclusively between the US and Russia.
As the two countries meet, various markets, such as energy and defense stocks, currencies, and commodities, such as gold and oil, are even more volatile. Traders and investors are monitoring the developments closely and how they will impact economic and political stability, supply chains, and inflation.
How Could Peace Talks Affect Markets?
Oil
Oil prices have shown bearish pressure after the announcement of peace talks. Expectations that an agreement between the US and Russia could reduce sanctions, which had previously affected oil production, might lead to more downside risk for prices. ⁽¹⁾
Foreign Exchange
The US Dollar declined as traders adopted a risk-on mood, triggering a rally in other major currencies as optimism rose on the peace talks. The Australian stock market has also seen positive movements, especially in sectors linked to global trade, as investors are optimistic that a peace deal could open trade routes and normalize supply chains. ⁽²⁾
A peace agreement could potentially drive currencies higher against the Dollar as traders move away from safe-haven assets.
Gold
If peace negotiations develop positively, traders may regain interest in more risky assets, expecting that a resolution to the conflict would stabilize global markets. However, gold prices remain sensitive to any new escalation or uncertainty, with investors balancing optimism against potential risks. A peaceful resolution could lead traders to move away from safe-haven assets like gold, while any setbacks could cause renewed interest in the metal as a hedge against uncertainty.
Stocks
Stocks have shown optimism, which is reflected in the broader market, with defense stocks rising amid expectations of increased military spending in Europe, regardless of the outcome of the negotiations.
However, concerns persist regarding the exclusion of Ukraine from these discussions, as Ukrainian President Zelensky has stated that any agreements made without Ukraine’s participation would be invalid, casting doubt on the talks’ legitimacy and potential effectiveness. ⁽³⁾
Economic Factors
The war between Russia and Ukraine has caused disruptions in global supply chains, especially concerning energy markets. A peace treaty could increase international trade, lower oil and gas prices, and ease inflationary pressures weighing across Europe. ⁽⁴⁾
Conclusion
The meeting between the United States and Russia sparked optimism in financial markets. A successful peace agreement could revive hopes in the global economy where international trade can resume without the pressures of sanctions and production restrictions.
