The impact of the Russia-Ukraine conflict on global markets 🤔
Monday, 21st February 2022 by Gotrade
Hey Gotraders,
Please note that the U.S. stock market is closed today due to Washington's Birthday. Trading will resume tomorrow. Meanwhile, let’s take a look at the ongoing Russia-Ukraine conflict.
Russia has been increasing its military presence along Ukraine's border for months now. NATO’s Chief thinks that Russia could invade Ukraine without any warning at all, and President Biden thinks that an attack could happen any day now. This CNN article gives you a good roundup of the conflict if you would like to read more about it.
Let’s look at how this conflict is affecting global markets.
🪙 Safe Havens
In times of crisis, investors usually turn to safe havens like bonds and gold. Bonds are generally seen as the safest assets.
This time around, gold has outperformed stocks and bonds. Gold prices have pushed above $1,900 per ounce. Citigroup analysts upgraded their near-term price forecast to $1,950 an ounce from $1,825, citing the geopolitical tensions.
🛢️ Natural Gas & Oil
Analysts expect the price of oil to skyrocket to easily $150 a barrel if tensions turn into conflict. Ukraine moves Russian oil to Slovakia, Hungary, and the Czech Republic. Surging demand and an undersupply of oil are also factors pushing oil prices up.
Energy markets will also be affected if Russia invades Ukraine. Europe relies on Russia for around 35% of its natural gas, mostly coming through pipelines that cross Belarus and Poland to Germany. The Nord Stream 1 pipeline goes directly to Germany, and others through Ukraine. The U.S. has threatened to impose sanctions on Russia should they invade Ukraine.
Disruption of oil and gas supplies could very well push prices up.
🏢 Companies with exposure
Several companies with exposure to Europe may have their investments at risk.
Energy firms such as British Petroleum (BP) and Shell (SHEL) both have some level of exposure.
BP has a number of joint ventures with Russia's largest oil producer. Shell holds a 27.5% stake in Russia's first LNG plant, which accounts for 1/3 of the country's total LNG exports. They also have a number of joint ventures with state energy giant Gazprom.
💰 Crypto & U.S. Equities
Crypto and U.S. equities seem to be trending down over the last few weeks. Analysts believe there are several reasons for it.
“While the crisis in Ukraine certainly has bearing on the stock markets, it’s important to note the confluence of multiple factors currently affecting the global economy. These include the continued prevalence of COVID-19, negative labor and supply-chain shocks, inflation concerns, the Fed signaling its intent to raise interest rates, and persistent economic inequality…. As cryptocurrency has become far more correlated with traditional markets over the past two years if these commodity prices are hit, the prices of crypto are also likely to be affected in the short term” - Mark Elenowitz, President of fintech company Horizon.
Other analysts believe that crypto may even soar.
“During times of war, gold performs very well, so Bitcoin should decouple from stocks and trade up if the crisis descends into an armed conflict” - Lou Kerner, CEO of Blockchain Coinvestors.
Why is this important? Analysts believe that most impacts will be relatively short-term.
“History tells us that stock markets initially react badly to armed conflict involving Western countries, and we can expect cryptos to follow the stock market downwards. But the good news is that the negative impact on markets tends to be short-lived…. Markets tend to recover quickly once investors realize Western economic growth continues unabated” - analyst Glen Goodman.
Fund your account 💰
The market is closed today, but you can still go ahead & fund your account now and get ready to start investing as soon as the market opens tomorrow.
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The legal stuff 🤓
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