The ongoing conflict between Russia and Ukraine has roiled global stock markets, sent commodity prices soaring and prompted investors to turn to safe havens such as gold. At the same time, the global economy has also been affected, and many strategists worry that a recession may be brewing.
Goldman Sachs (Goldman Sachs) strategists pointed out three major risks to the global economy caused by the conflict between Russia and Ukraine in a research report on Monday.
"while global imports from Russia and Ukraine are relatively modest, many countries are dependent on commodities from the region." A research team led by economists Yulia Zhestkova and Dan Milo said. "[and] the outbreak has disrupted the global supply chain."
In its latest report on the crisis in Ukraine, Goldman Sachs focused on supply shocks in three major industries. These supply shocks are caused by unexpected events that disrupt global supply chains, leading to falling output and rising prices.
Oil and gas
Last week, both the US and the UK announced bans on energy imports from Russia, while BP (BP) and Shell (Shell), two big oil companies, also withdrew their asset positions in Russia.
Russia is the world's third-largest oil producer after the US and Saudi Arabia and accounts for about 10 per cent of global oil supplies, according to the (IEA) of the International Energy Agency. Long-term supply shocks could push up oil prices.
"as the US and UK impose bans on Russian oil and gas, and Russia may ban the export of certain products, the risk of further disruptions in oil exports increases," Zhestkova and Milo said. "the historic price gap between Brent crude and Russian Ural crude, as well as the decline in tanker traffic at Russian ports, have shown a sense of rejection of Russian oil and a reduction in effective supply."
Goldman Sachs commodities strategists added that they expected crude oil prices to reach $135 a barrel in the coming months. This would increase inflation by 0.5 per cent and reduce global economic growth by 0.4 per cent.
Cars and metals
Goldman Sachs said the auto industry could also be hit by continuing conflict.
Russia and Ukraine are both major exporters of palladium, platinum and steel, and Russia also produces 4 per cent of the world's aluminium, according to (ADM Investor Services), an ADM investor service. All four metals are used in automobile manufacturing.
"imports of car parts from Russia and Ukraine have fallen, and some European carmakers have cut production," Goldman said. "continued disruptions could reduce the output of the affected factories by nearly 60,000 vehicles in March."
Hyundai and Renault are the two major car brands that have cut production in Russia.
Shipping
Finally, Goldman Sachs said the crisis in Ukraine could also lead to shipping supply shocks.
The world's three largest shipping lines-Mediterranean Line (MSC), Maersk (Maersk) and French Dafei Shipping Group (CMA GGM)-have all stopped shipping goods out of the affected areas, while a large number of ships are trapped in the Black Sea.
"several major shipping companies have suspended shipments to or out of Russia and frozen their operations in Ukraine." "rescheduling trade routes around Russia and Ukraine will take time and lead to higher transport costs," Zhestkova and Milo said.
Goldman Sachs said the supply shock could also have a knock-on effect, pushing up the prices of commodities such as wheat and fertiliser.
