In late 2021 and early 2022, satellite images revealed new Russian deployments of troops and other equipment cropping up in multiple locations near eastern Ukraine, Crimea, and Belarus, which triggered the greatest security crisis in Europe after the Cold War. Finally, on 24th Feb/2022, Several areas across Ukraine came under attack by the Russian army.
The move on 24th Feb came after months of speculation about Russia’s intentions when explosions rang out in multiple cities of Ukraine, including the capital Kyiv. After getting battered by the pandemic, the global economy is poised to be sent on yet another unpredictable course by the Russo-Ukrainian Crisis.
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Effect of Russo-Ukrainian crisis on global business
The economic analysts have predicted the tensions to cause dizzying spikes in energy and food prices, fuel inflation fears and spook investors, a combination that threatens investment and growth in economies worldwide. Some of the businesses that will get a hard blow due to the crisis are —
❖ WHEAT
Russia is the world’s largest producer of wheat and, together with Ukraine, also called the “breadbasket of Europe,” accounts for nearly one-fourth of total global exports. The crisis overhead and a lack of supplies from the Black Sea region could lift demand for the bread-making ingredient resulting in a rise in the price of wheat.
❖ CAPITAL MARKET
The military intervention of the two countries will drive a lot of the risk-off sentiment in the markets. Domestic and international markets have remained on the tenterhooks ever since the Russia-Ukraine crisis worsened, and it is believed that there will be high volatility over the next month due to this crisis. In India, where the overall trend is bullish, there may be high volatility over the next month.
Therefore short-term traders can remain light while long-term investors can look at this correction as a buying opportunity. On the other hand, when the global scenario is considered, the short-term volatility in the international markets has been caused by geopolitical factors and crises. As a result, the market will experience higher oil prices, equity sell-off and investors flocking to safe-haven assets like gold or real estate.
❖ OIL PRICES
The tensions between Russia and Ukraine are likely to boost oil prices even higher than they already are and impact economic growth. The increasing oil prices are expected to fasten the substitution to alternative energy sources, prompting oil prices to fall back to the reinvestment range eventually.
❖ TOURISM
Not only the food, oil and global markets, but the tourism industry of Ukraine has also reached its trough with the present Russo-Ukrainian Crisis. Tourism has suffered heavily since the Russo-Ukrainian conflict in 2014, and the figures from the World Bank show that tourist arrivals to Ukraine have never recovered since then. Not only in Ukraine, but cancellation of flight tickets to other European countries is also imposing a threat to the tourism industry of entire Europe.
As economists say, prolonged war could pile pressure on economies, 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 because of the Russia-Ukraine conflict, and economic analysts are warning it could go still higher, while growth could be affected too.
