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What happened?

A high-profile leaders summit between US President Donald Trump and Russian President Vladimir Putin in Alaska over the weekend did not result in immediate progress toward a ceasefire in Ukraine.

Putin, who spoke first at the post-meeting joint press conference, highlighted that negotiations were held in a “constructive atmosphere of mutual respect” and stressed that US-Russian relations were improving. Trump characterized their meeting as “very productive” but noted that there is “no deal.” European leaders also issued a joint statement on Saturday, acknowledging Trump’s efforts to end the war and reiterating that “Ukraine must have ironclad security guarantees.”

Follow-up meetings are being discussed, with Ukraine's President Volodymyr Zelenskyy set to meet with Trump at the White House on Monday, accompanied by key European leaders. But it remains to be seen whether a framework for negotiations will emerge in the coming days. Trump indicated that it would be up to Zelenskyy to agree to a deal now.

In a CNN interview on Sunday, US Special Envoy Steve Witkoff suggested Putin had agreed to US and European security guarantees that are similar to "Article 5" issued by individual countries but done outside the North Atlantic Treaty Organization (NATO). A Russian envoy told Reuters that Moscow could accept security guarantees for Ukraine, but Russia would in turn require its own security guarantees.

What do we expect?

The respective positions of Russia and Ukraine remain far apart. Ahead of the summit, Ukraine rejected the idea of giving up territory, supported an unconditional ceasefire before entering negotiations for a peace settlement, and seeks commitments on security guarantees, including from the US. In contrast, Putin is maintaining Russia's maximalist demands, including Ukraine ceding territory, demilitarizing, and refraining from joining military alliances or support mechanisms. A Reuters report citing diplomatic sources suggests Russia has offered to return "comparatively small tracts of Ukrainian land" and would seek formal recognition of Russian sovereignty over Crimea.

An area of progress was the NATO-style security arrangement, which is seen as a key element for any future ceasefire or peace agreement, and could signal a significant shift in Western support for Ukraine’s long-term security. Zelenskyy noted that all parties are now “developing a common view on what a peace agreement should be.”

With the gap remaining so wide, no decisive developments on the battlefield, and continued support for Ukraine, we expect the war to continue into next year. Diplomatic efforts will likely continue, and there may be attempts to reduce hostilities—a long-range aerial truce was suggested ahead of the summit, for example. But we think any negotiation process will be drawn out given the lack of trust and distance between desired outcomes, and any agreements will likely be treated with suspicion.

The threat of secondary tariffs on buyers of Russian energy remains, which has the potential to disrupt the global oil market and push up prices. India faces the threat of a secondary 25% tariff, announced earlier this month, being implemented on 27 August. However, the constructive tone from both sides reduces the likelihood of immediate sanctions. Trump’s comments also suggest that decisions regarding secondary tariffs on countries buying oil from Russia, notably for China, will be deferred by two to three weeks.

Meanwhile, trade tensions between the US and India persist. Media reports say a scheduled visit on 25 August by the US delegation to India to negotiate a trade agreement has been postponed. It is plausible that the US administration wants to keep the tariff threat on India alive to exert pressure on Russia. Nevertheless, we believe the current elevated US tariffs on India are unlikely to be permanent in nature. There is scope for India to offer concessions to balance bilateral trade and address US concerns regarding its reliance on Russia.

Read more in our latest Global Risk Radar publication.

How do we invest?
We see the following main investment takeaways from the latest developments:

• Progress toward a truce would likely improve economic sentiment in the region. If signs emerge of a cessation of hostilities, the focus would likely turn to Ukraine’s reconstruction, the potential for improved hydrocarbon supply and thus lower energy prices in Europe, and the possible removal of sanctions on Russia. According to a World Bank assessment released in February, the total cost of Ukraine's reconstruction could reach USD 524bn—or 2.8 times Ukraine’s nominal GDP in 2024—over the next 10 years.

Eurozone equities are trading at a 21% "like-for-like" forward P/E discount to comparable US companies, versus a long-run average discount of 11% (since 2008). Much of this wider-than-usual gap developed following the onset of the war, so we believe some of the European discount could close if there is peace in the region.

These benefits would likely depend on the perceived robustness of any ceasefire and whether it is seen as sufficiently sturdy to permanently end hostilities or only halt fighting temporarily. In “How to position for Ukraine’s reconstruction with bonds – an update” (published on 12 August) and “How a Ukraine-Russia ceasefire could affect European equities: What if?” (published on 14 August), we updated our views on which companies and assets we believe would benefit the most. We continue to recommend our "Six ways to invest in Europe" theme, which includes some of the beneficiaries of a potential truce.

• Talks involving Trump are fast moving, and markets will be sensitive to degrees of progress. Investors will be alert for the risk that a poor outcome could cause Trump to follow through on his threat of secondary tariffs on buyers of Russian energy. In our view, gold has provided an effective hedge against episodes of heightened geopolitical risk, and the precious metal continues to be supported by central bank buying—as part of the diversification trend away from US dollars. US domestic uncertainty, for example regarding concerns over Fed independence, also adds further support to gold.

At the same time, Trump seemingly stepping back from his threat of secondary tariffs on countries importing Russian oil validates the decline in the price of crude oil since late July, in our view. We expect Brent crude oil to stay in a USD 60-70/bbl trading range, but we have lowered our end-2025 and March 2026 forecasts to USD 62/bbl on a higher supply from South America and resilient output from sanctioned countries, before we expect prices to pick up to USD 65/bbl by mid-2026.

• In the near term, the Indian equity market could remain volatile as investors navigate the complexities of geopolitics. But India’s relatively closed economy and its lower dependence on exports (US goods exports accounting for only 2.2% of its GDP) will likely help blunt the economic impact. These should both lower the initial damage from tariffs, while also increasing the effectiveness of monetary and fiscal stimulus measures.

The key driver for Indian equities remains the steady earnings growth story. The high share of domestically-generated revenues makes the Indian equity market one of the most insulated in Asia, with less than 8% of MSCI India company revenues coming from the US. Private consumption and government spending continue to support the economy and are expected to drive double-digit earnings growth over the next two years. Combined with reasonable valuations, this underpins our “Attractive” view on Indian equities.