Mar 1, 2022 - Economy

Commodity prices surge after Russia's Ukraine invasion

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

For all the volatility in stock, bond and currency markets since Russia invaded Ukraine, it's the shifts in commodity markets that look most likely to ripple out and touch the world economy.

  • That was particularly true yesterday, as futures prices for many staple energy and food commodities soared, while stocks were down only modestly.

Why it matters: With inflation high, price spikes in fuels and food are unwelcome — and could be downright destabilizing in poorer nations.

By the numbers: U.S. crude oil rose 4.5% yesterday and is up 27% this year.

  • Wheat futures were up 8.7%, and are up 21.4% so far in 2022. Corn was up 5.4%, and 16.5% for the year.
  • Palladium, a metal used in electronics that is mined in Russia, was up 5.4% yesterday and 30% this year.

As higher commodity prices work their way through the economy, expect them to cause financial stress throughout supply chains.

  • That includes consumers who have already experienced 7%-plus inflation over the last year — and are not at all happy about it.

It is a conundrum for the Federal Reserve and other central banks.

  • Normally wild swings in commodity prices are viewed as one-off shifts, rather than part of underlying inflation dynamics.
  • But these price spikes are arriving at a time when inflationary psychology is already showing signs of setting in.

The bottom line: War in Europe is going to mean more expensive staple goods worldwide, and more popular discontent even in places far from the battlefield.

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