Investing.com -- U.S. President Donald Trump is expected to introduce a plan aimed at brokering peace between Russia and Ukraine, with the potential to impact global commodity markets.
As per analysts at Goldman Sachs (NYSE:GS), the most immediate and pronounced effects of a potential peace agreement would be seen in energy markets, particularly European natural gas prices and the oil sector.
The key expectation from Trump's proposal, set to be unveiled at the Munich Security Conference, revolves around easing hostilities and potentially reopening Russian energy flows into Europe.
Goldman Sachs analysts suggest that if Russian natural gas supply to Europe is restored, it could drive down European natural gas prices (TTF) by as much as 15% to 50%.
Before the war, Russia accounted for approximately 30% of Europe’s gas supply, a figure that has since dwindled to nearly zero.
Should Russian pipeline flows through Ukraine resume at even modest levels, European storage levels would improve, and gas prices would likely decline further relative to coal.
If Russian supply returned to pre-war levels, the price of TTF could drop to the mid-20s EUR/MWh, a stark reduction from current levels.
Goldman Sachs analysts also note that an easing of Western sanctions on Russian oil would likely not lead to a surge in supply, as global production remains tightly managed by OPEC+ rather than by sanctions alone.
The existing G7 oil embargo and price cap on Russian crude have been effective in redirecting Russian oil exports from Europe to alternative markets such as India and China.
As a result, while a peace deal might alter trade routes, it would not necessarily drive a significant increase in global oil output.
The geopolitical shift could also have a major financial impact on European energy companies with stakes in Russian firms. BP (NYSE:BP), which holds a 19.75% stake in Rosneft, and TotalEnergies (EPA:TTEF), with a 19.4% interest in Novatek, stand to gain substantially from a resolution to the conflict.
Goldman Sachs estimates that if their Russian assets regain 2021 valuation levels, BP’s market capitalization could rise by 20% and TotalEnergies by 10%.
Moreover, BP and TotalEnergies could see cash flow improvements of 4.6% and 2%, respectively, if dividend payments from Rosneft and Novatek are restored.
Meanwhile, European energy firms most exposed to natural gas prices, such as Equinor, OMV, and TotalEnergies, would experience significant shifts in their financial outlook. Equinor, for instance, has the highest sensitivity to European spot gas prices, with a potential 2.1% cash flow decline for every $1/mcf drop in gas prices.
If peace leads to a renewed flow of Russian gas and a substantial price decrease, Equinor's cash flow could decline by up to 14% in 2025.
However, even without a full resumption of Russian supply, the anticipated wave of new global LNG supply, primarily from the U.S. and Qatar, is expected to contribute to a long-term bearish trend in European gas prices.
Despite the potential economic benefits of a peace deal, the geopolitical outlook remains highly uncertain.
The war has reshaped global energy dynamics, forcing Europe to diversify its energy sources and accelerate its transition to renewables.
Any reintroduction of Russian energy flows would therefore be met with a complex mix of economic, political, and regulatory responses from European governments.