The Russia-Ukraine has been on for some time now. Russia declared war on Ukraine on February 24. Since then, the war has already caused some devastating losses. This includes many human lives, physical infrastructure, and human capital. But, you may want to know how the Russia Ukraine war is affecting businesses. Here are a few ways.
Hike in price of core commodities
The oil and energy markets
The war and geopolitical conflict between Russia and Ukraine have led to a surge in the price of some commodities. For instance, oil and energy prices have been affected. After all, Russia huge pile exporter.
Specifically, the price of Brent crude oil has recorded a high as $130 per barrel although it has come down a bit. Surely, such fluctuating prices will affect consumer petrol prices. In turn, inflation and recession are likely to set in.
Truncated supply chains is affecting businesses
Wheat export market
Ukraine is a foremost corn producer globally. Furthermore, Ukraine and Russia are among the top exporters of wheat world over (both accounting for about 29% of wheat export market globally). As such, bread and other related commodities are likely to become scarce. In turn, there would be an associated increase in price.
Automobile components
The local economy of countries may also take a hit. This is because since Russia and Ukraine supply a significant amount of metals, the supply chain for automobile components will be affected. Consequently, their prices will increase.
For instance, there is increasing shortage of aluminum and palladium. These are components used in harnessing chassis, wiring parts, and catalytic converters. This is already clear from the closure of assembly lines in Germany by Volkswagen and BMW. They do not have enough wiring harnesses.
Cosmetics production
Meanwhile, Russia and Ukraine are currently big exporters of other commodities such as sunflower oil, neon gas, and palladium. The war coupled with western sanctions has led to increase in prices of these products. In turn, this will affect international trade for businesses of other countries.
Specifically, you can consider sunflower oil which is used in the production of cosmetics. The increase in the price of sunflower oil will translate to an increase in the cost of make-up.
Some commodities are benefiting
Interestingly, some commodities are benefiting from these volatile conditions. For instance, the price of gold – which had crashed during the early period of the pandemic – has increased.
Furthermore, for many countries, cryptocurrencies such as Bitcoin is now regarded as a safer transfer vessel. After all, the war seems to have made other currencies more unstable in these times.
The global financial market
When thinking of the impact of the war on the global financial market, you can think in the terms of geopolitical risks for investors. Investors will feel a greater sense of uncertainty. As a result, there will be a reduction in financial assets such as stock price.
Ultimately, this translates to an increase in stock market volatility.
In summary
As a business owner, you may think you are not feeling the direct effects of the Russia Ukraine war. But, when you consider how the Russia Ukraine war is affecting businesses directly or indirectly, you may think different. Even if your business is not related to the commodities mentioned above, the secondary effects on local economies and inflation rates affect all. Thus, a quick end to the conflict is preferred.
