Global sell off amid geo-political situation, Crude oil above 115$

Global sell off amid geo-political situation, Crude oil above 115$

According to latest SBI report The ongoing conflict between Russia-Ukraine may impact financial markets ,Exchange rates and crude prices. After Russian invasion of Ukraine Brent crude shot up to 118$.However SBI economist also pointed that geo-political affect on Indian markets may only last for a short term period.



 

After many countries cutting off Russia from swift banking system ,RBI has also suspended all the transactions involving Russian entities done through swift banking system subject to international sanctions imposed on Russia.Around 3% of uk energy(oil and gas) comes from Russia whereas Germany Imports around 60 percent of its energy From Russia.

 

In 2021, the US imported an average of 209,000 barrels per day (bpd) of crude oil and 500,000 bpd of other petroleum products from Russia, according to the American Fuel and Petrochemical Manufacturers (AFPM) trade association.(source- al jazeera)

Many market analyst have warned that crude oil price may reach upto 150$ if west completely shuts off importing Russian oil .Perhaps this is why big players like USA and UK seem to be reluctant to sanction Russian oil and gas.If the West bans Russian oil, international crude prices could skyrocket to $150 per barrel, analysts say.



But even in the event of no sanctions on Russian oil, prices are set to remain very high and jump higher still because buyers and refiners are in a “self-sanctioning” mode, to distance themselves from Russian crude and looking for alternative supplies.

Historical events have proven that wars, terrorist attacks always had a modest impact on USA equity market leading to slightly severe affect on Indian markets .

As illustrated in this chart

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Certain sectors which heavily rely on crude oil prices will be impacted the most

If the conflict don’t escalate to the point where NATO forces step on Ukrainian soil which is a highly unlikely scenario ,Then global equity market may enter into a correction mode and recover at the rate it fell.

What drives equity prices are increased corporate revenue and profit, and the typical geopolitical event isn’t big enough to change those very much. The impact on global gross domestic product is modest in all but a few outlier cases.Still it is too early to speculate on this ongoing conflict , where will it end and at what cost .One thing that can be said with absolute certainty that the poor will suffer.

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