LONDON (ICIS)–The world order will be reset in the coming weeks and months following Russia’s invasion of Ukraine which UK Prime Minister, Boris Johnson, on Thursday called a “hideous and barbaric venture”.
The duration of hostilities and how Russia’s actions play out will impact commodity and financial markets globally. To date, Putin’s actions have been seen by some as following a predictable path, but the current situation signals much greater market volatility.
The full-frontal assault on Ukraine has prompted a renewal of efforts to impose meaningful sanctions on Russia and the Putin regime.
“It is President Putin, who is bringing war back to Europe. In these dark hours, the European Union and its people stand by Ukraine and its people,” said EU president, Ursula von der Leyen earlier in the day. “We are facing an unprecedented act of aggression by the Russian leadership against a sovereign, independent country. Russia’s target is not only Donbass, the target is not only Ukraine, the target is the stability in Europe and the whole of the international peace order. And we will hold President Putin accountable for that.”
The invasion marks a turning point as war comes again to Europe.
Johnson made it clear that the invasion is “An attack on freedom and democracy around the world”, possibly drawing a line in the sand, or signalling a fork in the road, in the country’s support for democratic nations states and democracy around the world which in recent years have become increasingly embattled.
“Russia’s actions pose a serious threat to Euro-Atlantic security, and they will have geostrategic consequences,” NATO said on Thursday
Johnson promised a massive package of sanctions targeted at the Putin regime, the details of which will become clearer in coming days, and it is those sanctions that will impact commodity and financial markets in the medium term.
In reaction to the invasion, oil prices pushed much higher on Thursday rising by between $7 and $8/bbl with Brent trading over $100/bbl and WTI not far behind. Naphtha prices in Europe skyrocketed with crude.
High natural gas prices impact energy-hungry chemical producers across the continent and producers of fertilizers that use gas as feedstock.
There have been indications that industrial networks are shut down in Ukraine. Oil flowing into the country is a vital resource for chemical producers although companies have in place alternative sources of feedstock built in reaction to earlier problems with crude supply.
Western Europe relies heavily on Russian crude and natural gas and any restrictions on flows, alongside much higher prices, will have severe economic consequences.
Across Europe, and farther afield, companies will be running scenarios considering what Putin might or might not do next.