Russia/Ukraine developments

I thought you may find useful my views on what the current Russia/Ukraine means for clients’ portfolios and the economy.

In truth the only person who knows what will happen is President Putin and he is saying very little. Markets historically find it difficult to price geo-political events because the outcomes are so unpredictable. I address some of the potential issues below:


Russia produces around 16% of the world’s natural gas and around 13% of the world’s oil. Europe would be the worst hit should Russia not export its oil and gas as they supply around 30-40% of Europe’s needs and there is not a lot of scope for other nations to fill Russia’s quota. This could push energy prices up further and cause inflation to go higher, although higher energy prices are good for net exporting nations (bad for net importers).

This could be the catalyst for countries to develop their own renewable energy projects so that they are less reliant on importing expensive energy from other countries.

Food prices

Russia makes large proportions of the world’s fertilizer (8-15% depending on the type of fertilizer) and 9% of the world’s wheat. When combined with Ukraine’s wheat production, this reaches 30% and restriction of supply could therefore result in increased food prices for consumers.


Central banks were hoping we were at or near peak inflation but if this conflict escalates then this has the potential to push higher.

Central banks and interest rates

Higher energy prices and food prices typically have a dampening effect on the economy. Central banks have worked very hard to keep economies afloat during the pandemic, so will they be willing to raise interest rates as aggressively as forecast to control inflation with these dampening effects in place? We could potentially see central banks be more cautious with how fast they raise interest rates.

Effects on markets

Oil and gas prices have gone up, gold has risen. Europe has underperformed the US, UK and Emerging Markets over the last week due to its reliance on Russia for key commodities.

Looking back at previous geopolitical events, we note that markets generally come out better than they went in: it is the uncertainty that spooks markets and often markets recover quickly afterwards. I am sure that markets will remain volatile however until we know what is to unfold.

As always, we continue to monitor the situation and will take action if needed.