Russian invasion of Ukraine fuels near-40% rise in gas price and oil to $105 per barrel as European stock markets tumble Global markets were thrown into turmoil on Thursday as the outbreak of war on European soil sent prices of commodities from oil and gas to wheat surging The ramifications of a potentially prolonged conflict involving Europe’s primary supplier of gas sent a chill through markets affecting prices across a broad spectrum of asset classes and investments Brent crude hit $105 a barrel for the first time since August 2014 following a rise of more than 8% on international energy markets The increase signalled a further rise on garage forecourts to record-breaking retail price for unleaded petrol of more than 155p a litre Russia is the world’s second-largest oil producer and sells most of its crude to European refineries. It is also the largest supplier of natural gas to Europe Oil prices have surged more than $20 a barrel since the start of 2022 as the Ukraine crisis went unresolved with fears that the US and Europe would impose sanctions on Russia’s energy sector The price of British gas for next-day delivery jumped 53% to 326p per therm as the invasion stoked fears of a disruption to global energy supplies a closely watched measure for European prices were up 57% on contracts for delivery in March Analysts at Investec think the renewed surge in gas price could force the energy regulator Ofgem to increase the household bills price cap to £3,000 in October. The 54% increase to nearly £2,000 announced earlier this month has already caused significant political fallout and sparked warnings of families having to choose between food and heating Typically seen as a safe haven in times of crisis gold moved through $1,950 (£1,460) per ounce at one point before settling back reaching levels not far away from its 2020 all-time high of $2,067 Russia and Ukraine are also large producers of important industrial metals such as palladium which analysts said could be in short supply over the coming months unless the war ends quickly Russia produces 6% of the world’s aluminium and 7% of its mined nickel Aluminium rose more than 5% to hit a record high of $3,466 a tonne in London Nickel hit its highest level since May 2011 at $25,240 at one stage was trading more than 5% higher on Thursday afternoon after touching $2,695.57 an ounce in the morning Between them, Russia and Ukraine export a quarter of the world’s wheat with Ukraine in particular known as the “breadbasket of Europe” Short-term European wheat prices neared record highs on Thursday afternoon Ukraine is also a major exporter of corn and barley There was a broad sell-off of shares across Europe and banks with big operations in Russia were especially hard hit Italy’s Unicredit and France’s Société Générale following moves by governments across the continent and in the UK to impose sanctions on Russian banks and wealthy Russian individuals The FTSE 100 index in London tumbled 291 points the Cac in Paris dropped 3.8% and the Italian borsa in Milan closed 4.1% lower the Nasdaq pared earlier losses and was flat in the afternoon while the S&P 500 was down 0.9% and the Dow Jones slid 2% Russian stocks plummeted as much as 50% when trading resumed on the Moscow stock exchange on Thursday morning following a temporary suspension The dollar-denominated RTS index tanked 49.93% in early trading The rouble-denominated Moex index fell 45% to 1,690.13 Thirty-one Russian companies are traded on the London Stock Exchange along with state-backed oil and gas producers Gazprom and Rosneft have secondary listings in the UK while their primary listings remain in Moscow A freeze on Russian bank assets in the UK nnounced by Boris Johnson sent shares in Sberbank plunging 74% while VTB held its value following a 30% drop since January the mainly state-owned Russian energy company that trades some of its shares in London The Anglo-Russian miner Polymetal was the top faller on the FTSE 100 with the Russian mining group Evraz in second place A prolonged war could pile pressure on economies including the UK with the cost-of-living crisis a particular concern Inflation is already at a 30-year high of 5.5% but with oil gas and food ingredients all rising on the back of the Ukraine conflict economic analysts are warning it could go still higher Tatiana Orlova, an economist at Oxford Economics said: “We will incorporate higher European gas oil and food prices over the medium term in our baseline as well as more financial market disruption and tougher EU and US sanctions on Russia The impact of these changes on our forecast for the global economy is significant cutting 0.2 percentage points from GDP growth in 2022 and 0.1ppts in 2023.” Even as gunfire sounded in Ukraine’s capital natural gas kept flowing normally on Friday through the major pipelines from Russia to Europe But the invasion and accompanying sanctions are casting a shadow over long-standing energy ties is already facing high gas prices and an energy crunch that has hit consumers in their pocketbooks Russia’s attack on Ukraine has whipsawed energy markets not least because Europe depends on Russian supplies of natural gas Here are key things to know about the impact of the invasion on energy: Natural gas prices soared on news of the invasion on Thursday even as gas flowed normally Prices fell sharply on Friday after United States and European officials said sanctions against Russia would not interrupt energy supplies or payments through banks for shipments of oil and gas fears of an interruption in gas supplies have rattled markets Russia accounts for more than 30 per cent of Europe’s gas for home heating industry and generating electricity; and other potential supply sources are inadequately prepared to bridge the gap if Russia’s gas is cut off “A complete halt to gas exports from Russia is highly unlikely but gas piped through Ukraine – which represents eight per cent of European supply – is very much at risk,” the analysts say Supplies of liquefied natural gas brought by ship from the US have helped relieve some of Europe’s gas shortage this winter and export terminals are running at capacity the German government has frozen the approval process for the already-completed Nord Stream 2 pipeline that would bring gas direct from Russia under the Baltic Sea Russia’s state-owned Gazprom could still use other pipelines through Poland and Ukraine so Nord Stream 2 is not needed for additional supply but to keep gas affordable and avoid interruptions like the pricing disputes The conflict is adding to the surging energy prices already plaguing Europe and the US crimping consumer spending and holding back economic growth If oil prices rise to $120 per barrel and gas prices remain elevated inflation would rise by a full percentage point and slow economic growth this year European governments have rolled out cash subsidies for consumers hit by higher utility bills Some heavy users of gas have shuttered or throttled back production Farmers have seen higher costs to fuel their equipment and those costs will turn up in food prices as well Some people who switched to discount providers – who rely on energy from wholesale markets – have been sticker-shocked with sharply higher bills or had their contracts cancelled when the supplier faced losses from high prices US officials went out of their way to say that they are not seeking to block Russia’s energy shipments despite it being a mainstay of Russia’s budget and thus a chief source of funding for the Russian military attacking Ukraine The reason: global energy supplies are tight and prices are high Cutting off Russian oil would send prices soaring and worsen the inflation plaguing the US and Europe while Europe would struggle to replace Russian gas Europe is the biggest customer for Russia’s state-owned utility Gazprom Gazprom has sought to diversify by selling to China But pipelines link much of its gas to Europe and Russia has few liquefied gas terminals that would let it send gas anywhere “Russia’s capacity to divert gas flows to China is very limited now and by the time it grows the EU will have other options,” said Alicia Garcia Herrero chief economist for the Asia Pacific region at Natixis bank Says Rystad Energy: “Russian gas exports bring in more than $300 million for the Kremlin each day – revenues they cannot afford to lose.” That’s why analysts have regarded a total gas cut-off by Europe or Russia as unlikely The war has intensified questioning of Europe’s gas dependence on Russia “The events of the last days show the imprudence of not having diversified our sources of energy and our providers in recent decades,” said Italian Premier Mario Draghi in parliament on Friday Italy imports around 45 per cent of its gas from Russia Europe’s shortage of gas reserves this winter came about because Gazprom held off from selling gas on the spot market beyond its obligations in long-term contracts That led to concerns that Russia was willing to use gas as leverage finding new energy supplies will take years Europe continues to need natural gas to fire its electricity plants until renewables are built up to provide enough energy and to make up for falling domestic production Analysts at Energy Intelligence say tight supply will likely keep prices high through the mid-2020s The long-term answer is to double down on developing renewable sources of energy to fight climate change energy expert at the German Institute for Economic Research in Berlin “Now we have to change course quickly we have to get away from fossil energies as quickly as possible,” Kemfert said There is a day before Russia invaded Ukraine and a day after .. and we are paying the price for the delayed energy transition.” “The best answer to fossil fuel wars is a significantly accelerated energy transition View the discussion thread.