Markets and the World React to Russia’s Invasion of Ukraine
Ripple Effects Across the Financial World
Russian troops have invaded Ukraine, kicking off what could be Europe’s most significant armed conflict since World War II. In response, stocks in Asia and Europe plummeted Thursday. Analysts note stocks typically sell off during times of conflict while some commodities like gold, which is sometimes thought of as a safe-haven asset, get a boost.
Other asset classes have also been impacted by the invasion. Bitcoin (BTC), Ether (ETH), and other cryptocurrencies fell yesterday. Meanwhile, given Russia and Ukraine’s role in the export of wheat, grain prices rose. The ruble, Russia’s currency, fell precipitously in the foreign exchange markets, hitting an all-time low against both the Euro and the US dollar.
Natural Gas and Oil in Focus
US consumers are most likely to feel the armed conflict’s impact at the gas pump, given Russia is one of the world’s largest oil producers. It produces 9.7 million barrels per day, second only to the US. The invasion comes as the global price for a barrel of crude has topped $100 for the first time since 2014.
Analysts explain there are a variety of ways the conflict could cause gasoline prices to spike further. These include damage to oil infrastructure as a result of fighting, sanctions brought against Russia, and even the possibility Moscow could cut exports.
Other Areas of Concern
Inflation is currently at levels not seen since the early 1980s, and Russia’s invasion has the potential to cause it to spike further. This is because rising oil prices and natural gas — another major export for Russia — mean increased heating and electricity costs. Other commodities such as metals and corn may rise in price, because Russia and Ukraine are major net exporters.
If inflation were to rise even further, the Fed would likely come under pressure to consider stepping up the pace of its planned interest rate hikes. That would mean higher borrowing costs for mortgages, car loans, and credit cards.
The market’s volatility is a result of several ongoing factors, and Russia’s invasion is a major piece of the puzzle.
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