Commodity Prices Spike as Ukraine Conflict Progresses

Shortages caused by the Russian invasion of Ukraine, and resulting sanctions, has pummelled global markets.

Commodities, which aren't always an excellent first-date topic but fundamental for daily life, made a superb stock impression yesterday with record price fluctuations. For example, nickel saw its biggest dollar increase on record.

What's going on? Concerns that the Ukraine conflict will result in a severe scarcity of essential resources are driving up commodities. Because of port blockades and embargoes, Russia and Ukraine have stopped shipping products consumed worldwide for food, fuel, and manufacturing.

Here's how the Ukraine conflict is rocking global markets.

Energy

Rumors that Russia may be subject to an energy embargo prompted European natural gas prices to soar by 345 euros per megawatt-hour earlier in the day. That may or may not signify anything until you consider that before last year's high of 30 euros had never been topped until Friday's high of 300 euros.

Oil prices continued to rise, bringing more financial worry for Americans at the pump. For example, California's gasoline costs have risen 51 cents in the past week, reaching an average of $5.34.

Food

The price of wheat has skyrocketed by more than 50% since the war began, to all-time highs, which is what happens when you shut off roughly one-third of the world's total wheat exports (for which Ukraine and Russia are responsible).

Higher wheat prices will disproportionately hit low-income nations such as Egypt and Indonesia, relying on Ukrainian and Russian grains. However, food prices are now at a peak, putting dinner in jeopardy. Protests erupted throughout the world in 2008 when wheat costs were comparable to those seen today.

Metals

According to Bloomberg, nickel has seen one of the most severe swings in metals prices ever. Russia is a leading nickel producer, which is used in EV batteries and also makes stainless steel. Nickel was already short in supply, adding to price pressures: Elon Musk urged businesses to "please mine more nickel" two years ago.

The Takeaway

The worldwide economy is taking a hit when it was just getting over the Covid Everything Shortage, which has added to the world's supply problems. However, because an economic expansion doesn't accompany this supply crunch, it raises the danger of stagflation and eventual recessions.






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