Commodity prices are on a tear as Russia’s invasion of Ukraine roils markets, with foodstuffs skyrocketing, metals setting records and energy in the throes of the largest crisis since the 1973 oil embargo, a report said.

Critically, what stands the current crisis out from that of the 1970s is that it involves every commodity – energy, metals and agricultural subgroups, said MUFG Bank, A member of MUFG, a global financial group, in its Commodities Weekly.

The stratospheric breadth and velocity of the moves in commodity prices since the Russian invasion of Ukraine is structurally altering the contours of policymaking and corporate strategy. The permanency of such pivots, with entities lining up to exit Russia and Europe now placing energy security above energy transition priorities, is staggering.

“Given Russia’s leviathan role in global commodities, the sheer ambiguity of how this conflict will end, as well as how extreme shortages in energy, metals and the agricultural space will be resolved, we are convicted that the world could be sleepwalking into a recession,” MUFG said in the report.

Energy: Oil prices have catapulted to their highest level since 2008, driven by both a deepening in the conflict as well as the rubber stamping of “self-sanctioning” with the US and UK now banning Russian oil imports (see here). Triangulating Russia’s lost barrels remains the laser focus. Demand destruction remains the only lever to rebalance the tight market (see here). Oil’s rally pales in comparison with European natural gas which reached the equivalent of more than $600 per barrel of oil this week.

Base metals: The clearest example of the extreme stress faced in commodity markets today has been the 300% rally in nickel this week – its dislocation will drive down liquidity across base metals with event risk in aluminium, copper and zinc.

Precious metals: Gold has cleared $2,000/oz on safe-haven demand with its traditional positive relationship with oil gaining traction; Platinum and palladium have jumped on supply scares; silver may retreat after surging.

Bulk commodities: Iron ore’s rally continues on geopolitics, weather disruptions in Australia and Brazil, as well as lower emissions controls in China’s steel industry.

Agriculture: Wheat and corn prices are skyrocketing on logistical disruptions to shipping, surging input costs and a rising threat to impending Ukrainian planting. 

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