Russia-Ukraine Crisis: Commodity Market Affected.
The past week has been a roller coaster of emotions for Ukrainians and Russians as the
conflicts unfold. This has also had an impact on the world. When crisis like this arises there is uncertainty in the commodity market as investors will either benefit or lose.
However, Moscow’s invasion against neighboring Ukraine affected the markets, with investors selling first and asking questions later. According to reports, Equities crumbled, Crude oil futures topped $100 a barrel mark. And Gold Spot prices breached $1,900 per ounce last Thursday. Also, Aluminium prices reached all-time highs.
The Analysts say this could be just the start of a rally in oil prices. Investors and companies should brace for higher commodity prices over the next few weeks. According to the founder of Vanda Insights, Vandana Hari, “The worst-case scenario is unfolding. Crude’s rally may have only just begun as the full impact on global oil and gas supplies is yet to be seen and factored in”.
He adds “The door to a diplomatic de-escalation is not firmly shut. But it will take some major efforts to kick it open again. Should the Kremlin decide to cut-off gas exports to Europe, all the world’s gas producers put together do not have the spare capacity to plug the gap”.
He explains further “To put things in perspective Russia exports about 5 million barrels per day of crude oil, more than half of which goes to Europe and 42% to Asia. As regards natural gas, Russia has the largest reserves of natural gas in the world but is the second-largest annual producer of natural gas after the US. Given all this, the current geopolitical tensions in Eastern Europe may drive commodity prices further up in near future, flaring inflationary pressure”.
“If the stand-off between the two countries defuses and the sanctions stay limited, the economic impact may be limited. Inflationary pressure underpinning gold prices”, he adds.