Oil prices, strategic positioning… The latest geopolitical tensions occupying the market may cause significant volatility in some commodity prices. Oil has reached the peak price of the last 7.5 years, and the declining production, increasing need for use and the impact of geopolitical problems in strategic natural gas flows seem to be effective in this. This inflationary pressure effect of oil prices should be taken into account, as it is the phenomenon that we monitor the impact of inflation in the world and that may underlie policy problems and failures. After the recent Russia and Ukraine tensions, the gas supply shortage that Europe may face has the potential and risk of putting pressure on prices.

 The effect of the ruble and Russian assets… The rise in oil is normally positive for Russia, but geopolitical tensions depreciate Russian assets due to the overall risk perception. Accordingly, the sensitivity of the ruble has shifted towards negative points. Being pushed out of the financial system due to a possible Russian embargo may cause this pressure to increase. A similar fluctuation occurred in 2014, where the collapse of the oil price also contributed. Now, the price pressure on the oil variable is in the positive direction, but the financial wave effect of a possible operation is a factor that outweighs.

Biden's Russian statements, the US's warning to the ambassador's staff in Kiev to leave Ukraine, the increasing threat of invasion on Ukraine... Markets are more afraid of the possibilities.

Eastern bloc and former Russian domain… Source: Norman J. G. Pounds, "Fissures in the Eastern European Bloc", The Annals of the American Academy of Political and Social Science

 Strategic dimension… When we put the US to one side and Russia and China to one side, it is the scenario that would be expected not to characterize them as the powers that will be directly confronted in a hot conflict and to keep the direct war at the size of an economic embargo. Because both sides have an extremely dangerous weapon, which we call nuclear, and if the side that thinks it is losing presses the button, a disaster scenario will be written for the world. Frankly, the West and the US don't care much about the east of Ukraine, the main goal is to keep Russia away from Europe and the main strategic outposts in this regard are Poland and the Baltic countries. There will be a case of shifting some American weapons to Ukraine On the other hand, weapons and logistic support can be provided rather than direct intervention in a possible invasion.

Rather than controlling an ethnographically mostly Russian region (Donnbas, Ukraine), it is undesirable for Russia to actually expand its sphere of influence to Central Europe and the Balkans. It is necessary to look at whether a similar situation will occur, which was the motivation of the Crimean War. The situation in the Baltic countries is as follows; There is a trio of Estonia, Latvia and Lithuania in the south of the region formed by the Karelia isthmus, which is the subject of the Winter War, and Saint Petersburg and Leningrad Oblast. These were annexed to the Soviet Union after being occupied by the Red Army in 1940 after the Molotov-Ribbentrop Pact. These countries became independent again after the collapse of the Soviet Union in 1991 and today they stand close to NATO and the EU.

 The issue of food… Ukraine is an important grain producer and the regions that lead wheat and grain production are under direct threat from Russia. Therefore, both the pressure to increase in the indicator spot prices in food production and the shortage of supply in terms of decrease in shipments may have an impact that may cause an increase in agricultural prices. Ukraine exports more than half of its total export volume to price sensitive markets.

Ruble, wheat and Brent oil price comparison… Source: Bloomberg

 Conclusion? It is clear that feeding the fears about Russia will increase the global inflationary pressure on energy and food prices. While the ruble will be adversely affected by risk aversion, movements in oil and other commodities will become more evident if they are also triggered by risks arising from embargo or trade relations. The commodity shock has many potential effects, after all, commodity price means inflation, which sets the tone of the Fed's actions.

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