Commodities | Emerging Markets | Europe | Politics & Geopolitics
Gas Price Spike May Be Brief on Russia-Ukraine Invasion
- By Henry Occleston and Ben Ford
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- 8 min read
Summary
• The tone of Russian action around Ukraine appears to be softening, however the risk of invasion remains.
• An invasion would disrupt a corridor through which the EU receives Russian gas and an important region for global wheat production.
• An invasion would likely weaken historically pro-Russia political parties across Europe – possibly impacting the French presidential election.
Market Implications
• Energy prices would spike in the near term.
• However, Ukraine is not as important to Russian gas supply as it once was. We expect the energy price impact to be short-lived.
• Risk-off flows would accelerate on an invasion. This will likely extend into neighbouring Eastern European countries at first, but then also recede quickly.
• A hit to Ukrainian wheat production could lead to a sustained higher global wheat price.
Summary
• The tone of Russian action around Ukraine appears to be softening, however the risk of invasion remains.
• An invasion would disrupt a corridor through which the EU receives Russian gas and an important region for global wheat production.
• An invasion would likely weaken historically pro-Russia political parties across Europe – possibly impacting the French presidential election.
Market Implications
• Energy prices would spike in the near term.
• However, Ukraine is not as important to Russian gas supply as it once was. We expect the energy price impact to be short-lived.
• Risk-off flows would accelerate on an invasion. This will likely extend into neighbouring Eastern European countries at first, but then also recede quickly.
• A hit to Ukrainian wheat production could lead to a sustained higher global wheat price.
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