It’s not just $100 oil—Russia’s invasion of Ukraine sends prices for everything from bread to steel soaring

February 24, 2022, 11:16 AM UTC

Russia has invaded Ukraine and commodity prices are responding, swinging wildly this morning. 

The prospect of all-out war in Europe not only translates to the much expected $100 a barrel oil price. As news of the invasion rattles financial markets, all commodities—not just energy, but wheat, corn, steel, and iron—are in for price hikes. 

Oil hit $100 a barrel minutes after a report that President Vladimir Putin had decided to conduct a special operation to “protect” the Donbas region in the east of Ukraine. All substitutes for oil rose with it: Benchmark Dutch gas futures gained as much as 41% to €125 a megawatt-hour; German power for March soared by 31%; and European coal for next year also surged, rising by 13% to $145 a ton on ICE futures.  

Food inflation

Over in the food aisle, Russia and Ukraine are the third- and eighth-largest wheat producers in the world, respectively, according to the Food and Agriculture Organization of the United Nations, and conflict in the area has sent the price of wheat to its highest level since 2012. Wheat on the Chicago Board of Trade was 5.7% higher at $9.3475 a bushel at 8:26 a.m. in London on Thursday.

Oilseeds are soaring too, and corn and soybeans are also about 5% higher—heightening concerns of accelerated and exacerbated global food inflation. 

Grain shipments are also at risk. Russia recognizing the independence and invading the Russian-backed separatist region of Donetsk on Monday jeopardizes a number of ports that ship out grains to all of Europe, as well as the country’s major steel mills.

Ukraine is a significant producer of uranium, titanium, iron ore, steel, and ammonia too. And the country’s steel makes up around 10% of Europe’s imports. Any disruption to the milling or shipment of iron will tighten Europe's already strained market and keep prices at the record high they reached last year.

The Western world will now have to balance taking strong action against Russia with the likelihood that this will send commodity prices rocketing higher. “The bigger picture will strongly depend on how Europe and U.S. will respond,” Hans van Cleef, a senior energy economist at ABN Amro Bank NV, told Bloomberg. “Will they imply sanctions against the oil and gas sector or not?”

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