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Russia and Ukraine went to war and oil prices soared

Views: 1000     Author: Site Editor     Publish Time: 2022-02-25      Origin: Site


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Russia's war on Ukraine sparked a global rush for safe-haven assets, with the price of Brent crude, the international oil benchmark, rising more than $4 a barrel to exceed $100 for the first time since September 2014 and climbing above $102 as fighting continued.  

The escalation of tensions between Russia and Ukraine also sent stock markets around the world down. U.S. stock index futures continued to fall as of around 11:30 a.m., with Nasdaq futures down nearly 2% and entering technical bear market territory for the first time since March 2020. S&p 500 futures were down 1.5% and Dow futures were down 1.44%.  

In the short term, continued geopolitical tensions push crude oil risk premiums high. The upside for oil prices depends on the extent to which the Conflict between Russia and Ukraine escalates, which could push prices higher if the situation deteriorates further and leads to sustained supply disruptions. A peaceful resolution of the conflict through diplomatic channels would help ease upward pressure on oil prices. In the medium term, the accelerating pace of tightening by central banks in Europe and the US will add to financial pressures, which are expected to increase as supply rebounds ahead of demand. As financial and supply and demand pressures materialize, the pressure on oil prices will gradually increase.  

For now, supply expectations are tight and OPEC is expected to continue to moderate and increase in the long term, but in the short term, changes in expectations including the situation in Ukraine and Iran negotiations are driving the market. Demand may remain flat in the long run, but may expand further in the short run. Overall, crude prices are likely to be supported in the short term, with the risks of supply changes and sentiment shifting to be watched.  

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