For Australians, the best news comes from the Daily Telegraph this morning that tells us that petrol prices could fall even with record oil prices because of the Ukraine war. In fact, oil prices are already falling, with West Texas crude down to $US95 a barrel, after being almost $US124 eight days ago!

WTI crude

That’s a 23% slide, which has to eventually show up in lower petrol prices at the bowser. And this has been helped by talks with United Arab Emirates oil producers who look likely to increase production.

It also comes at a time when the news headlines are starting to make us believe that a settlement of the Russia-Ukraine war is looking more likely.

It has been these hostilities that have forced up the oil price, which then snowballed on to petrol prices, which in turn threatened a huge spike in inflation, and an undermining of company profits hitting stock prices. And all this is a forerunner to a possible recession in 2023.

Based on the law of opposites, helpful suppliers of oil such as the UAE and OPEC, plus the possibility of imminent peace in Ukraine could set off a chain reaction of lower-than-expected inflation, better profits, higher share prices and stronger-than-expected economic growth, meaning no recession next year.

Let me give you the headlines and developments that give reasons to be optimistic about what might lie ahead:

1. “Substantial progress” made in Russia-Ukraine peace talks. (CBS News)

2. Ukraine says war could be over in two weeks as peace talks going "pretty well.” (telegraph.co.uk )

3. Three EU country leaders arrive in Kyiv in show of support for Ukraine. (Reuters)

4. ASX to lift rise, Wall St lifts as oil falls below $US100 (AFR)

5. Traders continued to eye the latest with ceasefire negotiations in Ukraine (CNBC)

I’m not going to kid myself that I can understand the thinking of Vladimir Putin, but the Ukrainian leader Zelensky must be seeing the going neutral stance and not joining NATO (which partly triggered this war) as a smarter option than fighting Russia and seeing hundreds of thousands of his country men and women dead!

He also couldn’t be happy hearing that President Joe Biden said he’d go to war for NATO but not Ukraine.

All this makes peace a much better chance than a week ago and explains why the oil price is diving and Wall Street is up strongly overnight. Some 90 minutes before the close of trading, the Dow Jones index was up nearly 2% and the Nasdaq (with its tech-heavy collection of stocks) was up a big 2.8%.

CNBC led with the headline: 'Stocks extend in final hour of trading, S&P 500 jumps 2%.' And if peace wasn’t on the table, stock prices wouldn’t be rising.

A stock market is a filtering process of all that’s going on in the world that could affect company profits and, in turn, stock prices. And today the good news outweighs the bad news, but there is still worrying stuff out there, especially coming from China, despite that country recording better-than-expected economic data this week.

As CNBC reported: “China is currently facing its worst Covid-19 outbreak since the height of the pandemic in 2020 with major cities including Shenzhen rushing to limit business activity”.

This will be another challenge for the supply chain, which then impacts on inflation and will undermine the unbridled enthusiasm a stock market would have if oil prices continued to fall on peace negotiations in Europe.

And if that virus-economic threat can be overcome, then stocks will have to deal with the Fed, which is set to raise interest rates this week, and this could set off a series of monthly rises that could challenge share prices as well.

The Washington Post recently reported: “Goldman Sachs analysts have forecast that the economic fallout of Russia’s war will pull back on economic growth and raise the risk of the United States entering a recession.”

Ukraine plus the new China virus problems undoubtedly will make the Fed more cautious about rapid rate rises. That could be the only plus for stocks coming out of these new curveballs for the global economy and stock markets.

I’ve always argued that 2022 would inevitably be good for stocks and despite all these challenges I believe the rebound of economies throwing off the restrictions of the pandemic will be a powerful force for stock prices.

That said, you have to hope China’s Coronavirus problems aren’t mirrored around the world! If they are, my positivity for stocks will be trimmed back.