Is World War and an Economic Catastrophe In The Near Horizon?

By Michael D'Ambrosio | February 24, 2022

Red alerts are sounding on the eastern edge of Europe as Russia is packing the Ukrainian borders with immense and overwhelming artillery that can only indicate a full-fledged invasion is on the horizon in the imminent future. An invasion will bring a substantial loss of human life and serious economic implications to the world markets and the prices of commodities. This attack will create a shockwave through financial markets. Starting with oil, a Russian staple ( the world’s third richest supplier of petroleum) can take a massive hit as a consequence of their actions. Many experts predict this will push oil to over $100 a barrel, which will only worsen gas prices throughout the world. What’s more concerning is that Europe is heavily reliant on Russia for oil. Their gas flows into Europe via the Nord Pipestream which cuts through a large part of the Ukraine. An invasion would mean a stoppage in the pipeline and leave a huge percentage of Europe in an oil deficit. A Russian attack will result in severe government sanctions from the U.S and other states that will cut or slow down Russia’s supply chain and the flow of energy. Essentially, we can wake up the next day and experience a totally different financial layout and perspective. After the news of a potential attack, the IHS (Information Services Company) lowered their projected global growth from 4.3% to 4.0%. News of these anticipated events are causing panic and creating red alerts across the world markets. Simple commodities such as wheat and palladium will spike and inflate as a result of potential economic sanctions. This is incredibly impactful as Russia, along with the Ukraine, generate around 30% percent of the world's production of wheat. An increase in this price will affect people all around the world, especially those in 3rd world nations that can’t afford high prices. Wheat is such a simple ingredient that is commonly used and will put a lot of people in a pinch. When looking at the futures price of Palladium, it has skyrocketed $500 in the past two weeks. It’s a critical component in the fuel cells to power cars and buses. A price increase in this sector helps no one. Looking at the markets for wheat and palladium emphasizes how dependent industries are on Russia. There are particular markets that are already being hit hard by different circumstances, aluminum for example is in a 2.3 million ton deficit. Russia produces almost 4 million tons of aluminum, so a deduction in their yearly distribution and production will be catastrophic to this industry and increase the price at a substantial rate. Russia produces an abundance of commodities and they will spike in price if the Kremlin crosses into Ukrainian territory. It will create financial turmoil for a substantial period of time and will add to the continued losses everyone is already facing from inflation.

Edited by Maggie Reddington