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Energy Prices Soar as Sanctions Create Stagflationary Risks on a Global Scale

RUSSIA
  • USD/RUB BGN trades -4.89% lower this morning around 132.45 after yet another volatile session in illiquid conditions pushed price action up to an intraday high of 177.26.
  • USD/RUB REGN remained closed yesterday as multiple onshore quotes add headwinds to trading in RUB due to Western sanctions and MOEX closure.
  • Energy and commodity prices remain in major bull mode with brent up +3.39% this morning just shy of $130/bbl with some analysts forecasting $180-200/bbl levels if the West enacts a Russian oil embargo.
  • Natgas & Nickel have also surged, bolstering Russia’s terms of trade significantly, although the impact of a full embargo is expected to drag Russia’s GDP down by ~14% should it be implemented.
  • Fighting resumes in key cities as negotiations fail to deliver viable ceasefire prospects with both sides still far apart on issues like the direction of human corridors at the very least.
  • Although Markets viewed Putin’s options for de-escalation as mildly positive, it seems unlikely that they would be sufficient as without gaining a greater degree of control over Kyiv – Putin loses the political battle.
  • The most likely next steps are increased aerial assaults and continued sieges of key cities to exert maximum pressure over time.
  • This could lead to a more protracted conflict, which would likely keep market sentiment extremely weak and create more entrenched stagflationary pressures in global markets.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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