Ukraine War Outlook: Scenarios Updated
Bottom Line: With Russia maintaining its long-held demands in Ukraine, territorial disputes remain specifically regarding the status of the Donbas and other eastern oblasts, and President Trump’s attention has shifted toward the Iran conflict, our baseline scenario in Ukraine is now the war dragging on throughout 2026 (70%) and the alternative is a Russia friendly peace deal (30%) likely in 2027 following multiple rounds of revisions to Trump's proposal late 2025. We expect Ukraine will be compelled to cede territory, accept non-NATO status, and recognize Russian sovereignty over Crimea.
With the Trump administration shifting its focus toward the conflict with Iran, and territorial disputes specifically regarding the status of the Donbas and other eastern oblasts remaining a primary obstacle to a peace deal, we have raised the probability of the Ukraine conflict continuing throughout 2026 to 70%.
This shift is driven by Washington’s recent pivot toward Iran, which has effectively sidelined Ukraine on the U.S. foreign policy agenda. (Note: We think recent two-week ceasefire in Iran could alter this dynamic, potentially allowing President Trump to refocus on Ukraine but this will take time. Given that both the U.S. and Iran appear reluctant to resume hostilities, we anticipate the ceasefire in Iran will likely be extended).
Meanwhile, the battlefield in Ukraine remains in a state of grinding attrition, characterized by limited tactical breakthroughs and significant unresolved territorial disputes. Over the past week, Russia has escalated its aerial campaign, launching intensive drone and missile strikes against civilian and energy infrastructure in southern hubs like Nikopol and Kherson. While President Zelenskyy proposed a temporary Easter ceasefire to protect the energy grid, the Kremlin has remained dismissive of the initiative. In the meantime, diplomatic efforts in the UAE have hit a standstill, further complicated by the impact of concurrent regional conflicts in the Middle East.
While the Trump administration initially aimed for a swift resolution, mediation efforts have entered a period of stagnation with very little forward momentum. We think a Russia-friendly peace deal is now viewed as a lower-probability outcome (30%) for the near term, with the timeline likely slipping into 2027 as we anticipate that President Putin will also be eager to finalize an agreement before the end of Trump’s term in 2029. This extended timeline reflects both the mounting exhaustion of the parties involved and the inherent complexity of revising the current 28-point framework.
We continue to think Ukraine remains in a weaker negotiating place, at some point Ukraine will have to admit giving up some land to Russia. Under the Russia-friendly peace deal framework, an agreement would likely involve the formal annexation of portions of the four occupied Ukrainian oblasts. Furthermore, Russia would likely secure a commitment that Ukraine will forgo NATO membership, prohibit the stationing of foreign troops, and recognize continued Russian sovereignty over Crimea.
If a peace deal is reached as we expect in 2027, the focus will shift to the lifting of sanctions. We anticipate that the removal of sanctions will be a slow, staggered process. Europe, in particular, will remain wary of returning to a dependency on cheap Russian energy. From a geopolitical perspective, any credible peace deal between Russia and Ukraine would help soothe a path away from food and energy problems, and remove much of the geopolitical risk premium.