Monday, September 26, 2022

How Russia’s Ukraine conflict could reshape global economics and markets even if it doesn’t end in war

Date:

As Russia and Ukraine teeter on the edge of conflict, financial markets and economists are far more preoccupied with when and how much the US Federal Reserve will lift interest rates.

However, some leading global market analysts are warning that the risks of war, and even the costs of an uneasy peace, are being underpriced.

Chief among them is Rabobank’s global strategist Michael Every.

“We are in the unusual position of global headlines and politicians warning of the risk of a major war, and yet markets — until very recently — remain mostly unconcerned,” he wrote this week.

Beyond share and other financial markets, the crisis is already pushing up the price of oil and gas, as well as key metals used for everything from car making and electronics to kitchenware and construction.

But rather than solely focusing on the short-term implications of a Russia-Ukraine conflict on commodity supplies and prices, Mr Every has taken a deep dive into the longer-term ramifications under different scenarios.

Biden and Putin sit face to face.
Many analysts believe Russian President Vladimir Putin (right) is testing the resolve of his US counterpart, Joe Biden.,AP: Denis Balibouse/Pool Photo,

“The Ukraine crisis represents a tipping point in a larger metacrisis: the fracturing of the post-1945, -71, -78, and -91 world order,” he warned.

“This obviously has huge market implications!”

So, what exactly are they?

Oil and gas

In the short term, it is widely acknowledged that a Russia-Ukraine war, even a limited one, would spark a further massive rise in oil and gas prices, especially in Europe.

Russia supplies about 30 per cent of Europe’s oil and 35 per cent of its natural gas, which would be cut off in the event of conflict.

Rabobank’s energy analysts believe that could push oil prices up from already-elevated levels of about $US90 a barrel to $US125, with gas prices following higher.

The widely watched benchmark Brent crude oil price has already increased by more than 60 per cent over the past year.
The widely watched benchmark Brent crude oil price has already increased by more than 60 per cent over the past year.,Supplied: Refinitiv,

RBC’s head of global commodity strategy, Helima Croft, also believes prices will head higher in the event of Russian supplies being disrupted, despite the US government’s best efforts to source alternatives.

“While there is scope for LNG imports [mainly from Qatar] to help mitigate the impact of a Russian disruption to European consumers, available capacity is not all well connected to those that would experience disruption,” she explained in a note.

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Nation World News Desk
Nation World News Deskhttps://nationworldnews.com
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.

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