The Russia-Ukraine conflict, now in its third year, has profoundly impacted global political and economic landscapes. Geopolitical tensions have emerged as a pivotal factor influencing global commodity prices and trade patterns.
As the most severe geopolitical crisis of the 21st century, the conflict has had a widespread effect on commodity markets. In 2022, the year the conflict intensified, the prices of major global commodities fluctuated by over 50 percent. Some, like potassium chloride fertilizer, saw fluctuations exceeding 150 percent.
Research highlights a positive correlation between commodity price changes and the escalation of the conflict. From February 24, 2022, to March 30, 2024, each military engagement between Russia and Ukraine contributed to a 7.5 percent increase in natural gas prices in Europe and a roughly 2 percent rise in global oil and wheat prices.
However, as the conflict drags on, market participants have adjusted their expectations, reducing their sensitivity to ongoing tensions. Consequently, the war's influence on commodity price volatility is waning. While prices of major commodities have begun to decline, they remain significantly higher than pre-conflict levels as the situation continues.
Reference(s):
Russia-Ukraine conflict: Transforming global commodity trade dynamics
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