Russia looks increasingly embedded in the conflict, and with relentless bombardments of Ukrainian cities and human tragedy continuing, speculation is that the US and Europe will retaliate by banning Russian energy exports. That would would have a richochet effect on their economies, with a supply squeeze on global markets, pushing up prices for industries across the board and making the cost of living crisis even more painful. This piles pressure on central bank policymakers, who are faced with the increasingly difficult tightrope to tread of trying to bring down inflation by raising rates, which will make overall costs more unbearable, potentially tipping economies back into a downturn.
A barrel of Brent crude jumped 15% earlier to its highest point since 2008, spiking at $139, before settling back at just over $126. This is still a very uncomfortable level for companies and consumers who are set to pay the price in terms of yet higher higher transport costs.
European natural gas prices have exploded since the start of the year and soared to fresh all time highs above €240 per megawatt-hour earlier today. If Russian exports are turned off, it will leave a huge gap in European energy needs, given the country accounts for more than 30% of the region’s natural gas imports.