Tomorrow is the day that Trump meets with Zelensky and the Europeans to decide if a peace deal gets done.
We have covered the oil markets quite a bit on this site, Higher level geopolitical or as I prefer to call them macro-political market factors. are the central concern of all my posts As such I just want to point out that whatever way the news breaks on this the result could be considerable volatility on Monday. But I also want to go over a few of the higher level issues involved.
First, very early on in the history of the Ukraine war Foreign Affairs the mouthpiece for the mainstream establishment’s Council on Foreign Relations in a special issue suggested that the end game for peace would be a Korean type solution where the military lines are frozen in place and both sides armed to the teeth keep a perpetual standoff. In a very general way we obviously are moving in that direction. The devil of course is in the details–will Europeans deploy military force to safeguard the boundary, will the US give article 5 protection just without NATO inclusion, will Russia get the Donbass—you fill in the details because right now its anyone’s guess and the particulars of trump’s meeting have not really been released..
Second, the more important issues have to do with the realist matter of whether peace is reached or the whole response against Russia escalates and how this endgame goes onward for perhaps quite a while. IT also includes many issues in terms of the power relations between Russia and China, Europe with the US, and whether Russia really wants to stop it summer offensive while it continues to make military gains. And, of course, what all this means for the broader market.
So lets go a little deeper into some of these key issues and their market effects.
—If no deal is reached Trump can go one of three ways. He can either blame Zelensky and not put oil sanctions on third party buyers of Russian oil. Or he can ratchet up the sanctions. The third possibility is everything is put on hold for further negtiations. The former obviously would be at least shorter term bearish for oil or if sanctions escalate subsrabtially quite bullish. The third possibility maintains the status quo ante.
—The Europeans if theres no deal will no doubt continue to do what they have initiated which is make large arms purchases from the US to give to Ukraine. this would be bullish for military contractors. Could Trump curtail these purchases to get the deal he wants. Perhaps, but not likely especially since he’s long asked the E.U. to fit more of the bill . Peace which is the much hoped for option by this writer would be more bearish shorter term for the military sector in this area.
—If peace is reached the guarantees involved could still lead to a continued ramped up military spending on a large scale depending on the specifics as the two sides re-arm to protect that DMZ. So the outcome could still be bullish here for the sector depending on the fine print.
In terms of the US and global economy as a whole a peace deal would be very bullish and a filure here overall bearish in terms of this factor.
One can, of course argue different things about how this plays out and its effects, but peace or not Monday could be a very volatile day as the likely outcome here starts to materialize if it still remains in all likelihood undecided.
Longer term while peace could be bearish shorter term for the oil sector the lack of new sanctions and such a peaceful outcome could be great for the overall global markets and then indirectly for oil as economic demand makes up for RUssian oil production becoming, perhaps, no longer sanctioned. Since much of that oil has in fact escaped the current sanctions’s regime it may have less of an actual effect than expected, but RUssia is a huge oil producer and Petro-state. New stepped up sanctions will be bullish for the sector but the counterfactuals are the effects on the global economy and oil demand as they would go onto the huge economies of India and China above those already in place..
This is not a stock touting site so my point is simply a heads up that incredibly important macro-political events are about to unflod and anyone in the markets needs to follow closely these events and try to figure out what the effects will be and Monday is a pivotal day. We will return to some of these issues in later posts as the results become clearer.
My own view is that while Trump put a good spin on events a positive result here is very uncertain for the following reason. I hope this is not the case, but the Europeans may for their own political reasons encourage Zelensky not to accept the offered deal on the table and Putin may simply be engaged in a stalling tactic as his offensive proceeds. Trump may even know this despite putting a good spin on the meeting. He may prefer that it seems like Zelensky and the Europeans squashed the deal and not that his diplomacy failed at this point to get the desired oytcome. In this case the key issue becomes whether extreme oil sanctions go into place or not. I think if no peace deal is reached they will, but he has given himself an escape clause here.
On the other hand, if this view is wrong than rather than trying to check Trump’s power a new realignment will have occurred with NATO and Trump now solidifying their revitalized compact in a new power dynamic. Trump will also have given Putin a way out of the war and a partial return to the community of nations and potentially steered him away from his alliance with China and the BRICS to a somewhat more neutral stance. This would be the ideal outcome and win Trump the Nobel prize which he already deserves for all the significant peace deals he has made in the world.
Last point. This site has repeatedly argued that the globalist-socialist model regardless of one’s own personal politics horribly unerestimates the power of the individual great man in history. Trump has many times shown that the future is indeed unwritten while he is around and that he is not afraid to use the full hegemonic power of the country to get specific outcomes. Monday is a big day but however it goes even negatively a month or two from now could be very different.
Disclaimer– the information discussed is simply one person’s opinion nothing more or less. It is only for entertainment purposes. By using this blog you assume all risks associated with using this advice, suggestions, information, conclusions and everything else contained here-in and that you completely and fully understand that you and you alone are 100 per cent responsible for anything that occurs from using this information and material in anyway whatsoever–regardless of how you interpret any discussion, conclusions or advice contained here-in. Any discussion of actual stocks or investments is in no way a recommendation and is only for educational purposes. You should listen to many competing opinions, consider all the counterfactuals to what is argued, seek out always if necessary professional advice, and of course ultimately make your own decisions about the markets.