The Russia-Ukraine crisis is unfolding at a rapid pace. After months of denying an attack, Russia's president Vladimir Putin yesterday announced a “special military operation” aimed at “demilitarisation” and “denazification” of Ukraine, and protection for pro-Russian Ukrainian separatists.
As the conflict escalates, analysis turns to the scale of Russia’s ambition, both within Ukraine and, potentially, the wider region.
What does this mean for the economy? Russia’s attack on Ukraine has implications for the global economy. Russia is a major supplier of oil and natural gas, to Europe in particular. European natural gas prices could rise back towards their December 2021 peak, given gas stocks are already very low. And, in the hours since the invasion, oil prices have jumped to over US$100. However, the increase may not last if other large oil producers decide to increase supply.
Meanwhile, the prices of some metals (like aluminium) and agricultural commodities (like wheat) could also rise, as Russia and Ukraine are major producers. One consequence of higher commodity prices could be even further increases to global inflation, which is already a concern for many. That in turn could put even more pressure on central banks to raise interest rates.
Longer-term consequences Regardless of how exactly the current crisis plays out, there may be long-term consequences. The crisis may hasten ‘decoupling’ (that is, a reduction in economic and trade links) between Russia and the US. At the same time, the European Union is likely to face intense pressure to reduce its energy dependence on - and cooperation with - Moscow.
There may also be implications for the speed of decoupling between the US and China, given relations between Beijing and Moscow appear to be closer than ever. A more fragmented world would, no doubt, experience more flare-ups of geopolitical tensions, potentially making markets more turbulent.
What does this mean for your investments? The coming weeks could see continuing volatility in worldwide markets. It can be painful to see fluctuation in your investments but history shows that sitting tight and looking to the long term nearly always proves better for investment returns.
And, at the moment, no one has a clear idea of how the Russia-Ukraine conflict will pan out, but our propositions are designed to be resilient over the long term. We have full oversight of your investments with us and will continue to monitor markets, taking any action if required.
If you have any questions or concerns about your investments, please don’t hesitate to contact us and we will be happy to help.
Director/Independent Financial Advisor