Ukraine-Russia War Outlook: What May Happen in 2027?

Weak Diplomatic Engagements Alongside Continued Military Escalation

With the Trump administration continues to focus on the conflict with Iran along with the mid-term elections approaching fast in November, and considering earlier U.S.-mediated contacts in September produced limited progress, we consider the probability of the Ukraine conflict continuing throughout 2027 is now 80%. It is obvious that the major disagreements over territory and security guarantees remain unresolved as territorial disputes specifically regarding the status of the Donbas and other eastern oblasts remain a primary obstacle to a peace deal.

The current situation is driven by Washington’s continued focus toward Iran, which has effectively sidelined Ukraine on the U.S. foreign policy agenda. (Note: Especially the Strait of Hormouz remains the core issue to deal with the domestic inflation in the U.S.).

Meanwhile, the battlefield in Ukraine remains in a state of grinding attrition with limited tactical breakthroughs. Over the past weeks, though, Russia intensified its attacks on Ukrainian infrastructure and Ukraine executed strikes on Russian facilities. (Note: Russia has increased its use of faster jet-powered drones alongside ballistic missiles as well, putting additional pressure on Ukraine’s air-defence network).

While the Trump administration initially aimed for a swift resolution, mediation efforts continue to move very slowly. U.S. has proposed a new trilateral technical-level meeting involving Ukraine, Russia and the U.S. by the end of October. President Zelenskyy said on October 4 that Kyiv had accepted the proposal and was prepared to meet in the UAE or another location proposed by Washington while Russia had not yet formally accepted the meeting as of October 4.

We think a Russia-friendly peace deal is now viewed as a lower-probability outcome (20%) for Q4 2026 and H1 2027. We anticipate that President Putin will also be eager to finalize an agreement before the end of Trump’s term in 2029 considering mounting exhaustion of the Russian society and financial burdensome of the war. (Note: If a peace deal is reached in or after H2 2027, the focus will shift to which sanctions will be lifted and when. We anticipate that the removal of sanctions will be a slow, staggered process). From a geopolitical perspective which is important for Islamic economies, 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.

It is worth noting that 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.