Here is why crude oil and gold prices are inching up because of Russia’s war on Ukraine
- Sanctions by the US and western countries on Russia after it invaded Ukraine have triggered
crude oiland gold prices to their highest.
- This is because the situation threatens to disrupt Russia’s exports of commodities like energy and metals.
- Note that Russia is one of the top producers of oil and gold.
AdvertisementRussia’s full-scale attack against Ukraine along with sanctions by the US and western countries have triggered crude oil and gold prices to their highest. This is because the situation threatens to disrupt Russia’s exports of commodities like energy and metals.
The invasion of Ukraine by Russia happened in the early morning hours on Thursday and led to missiles hitting airports and military bases across the country.
Why did oil prices rise ?
Oil prices have been constantly rising for over a week on growing tensions between Russia and Ukraine as the circumstances would disrupt oil production from one of the world’s largest oil producers – Russia.
The US and western countries have imposed new financial and economic sanctions on Russia for attacking Ukraine, which has a potential to disrupt exports from one of the largest producers of oil.
The wave of sanctions impedes Russia's ability to do business in major currencies and blocks provision of any financial support to Russian banks and state-owned enterprises.
The move hit the Indian economy badly as it imports over 80% of its oil needs and rise in oil price increases the import bill.
$XAUUSDEvery time there are concerns around inflation and rising rates, suddenly commodities start showing signs of strength.In the erstwhile up-cycle, it was more supply side constraint driven - metals, coffee, sugar, you name it.With war fears imminent, suddenly the commodity of choice for investors globally is seeing upsurge.Let's not forget the fact that India has about USD 1.5 tn of Gold in Households! Yet, our love for this metal grows fonder by the day.— (@mehrotra_saket) February 25, 2022
Why are gold prices rising?
Russia is the world’s third largest producer of gold after Australia and China. So, these sanctions by western countries against Russia are expected to stiffen the global supply.
Also, at a time when the equity market has become volatile and risky investors are shifting some of their investment to gold, which are considered a safe haven in difficult times.
“Geopolitical uncertainty has raised premiums for safe-haven commodities like gold and silver, while Russia supplies crude and natural gas to most of Europe, which has resulted in rising oil and gas prices, said Prathamesh Mallya, AVP- research, non-agri commodities and currencies at broking firm Angel One.
SEE ALSO: Russia’s Ukraine invasion may give India’s upcoming IPOs some cold feet
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