How does the Russian Ukraine situation affect you?

The Donetsk and Luhansk regions (collectively known as Donbass) held by separatist forces in Ukraine where conflict between the Ukraine military and pro-independence militia (allegedly supported by Russia) has been going on for more than 7 years. While Crimea was annexed by Russia in 2014 it remains to be seen how this latest incident unfolds. Russia already recognizes Donetsk and Luhansk as independent states and has sent through “peace keeping forces” into these two region but will this result in further incursion into Ukraine territory? If a large scale war does break out, what impact could that have on the rest of the world?

Energy prices will clearly escalate. Oil prices have already started to increase while the price of Natural Gas and LNG may be impacted if Germany terminates the Nord Stream 2 pipeline which pumps Natural Gas from Russia to Germany. While oil is a primary input for transportation and heating around the world, an increase in oil prices could stoke inflation higher, resulting in faster interest rate increases. On the flip side, some have suggested that the Federal Reserve hold back on March interest rate increases as the country may not be able to absorb a double whammy of higher oil prices and interest rate increases. Sanctions are already being imposed by some western countries on Russian owned assets in those countries and imposing trading bans which may make it difficult to conduct business with certain regions. Ultimately higher input prices result in economic slowdowns and consumption contractions creating a deflationary impact.

Any potential for war, creates uncertainty which impacts economic activity, stock market valuations as the risk sentiment worsens. Whether this situation resolves itself in a relatively quick timeframe or drags on for a few months or years is yet to unravel, but it clearly adds another spanner in the works of an already uncertain and volatile world.

Electricity tariffs continue to increase in Singapore and higher energy prices translates into higher electricity and transport costs for Singapore in the near term.