The Russia-Ukraine conflict and the fear of a possible invasion that could unleash, in turn, a war, could be felt in global marketsfrom the prices of wheat and energy, to sovereign bonds in dollars from the region and the stock markets, so not even Mexico is exempt from the perception of risk.
After Russian President Vladimir Putin recognized the independence of two breakaway regions in eastern Ukraine and sent army troops to various areas of this entity, rumors of a possible invasion grew and, with them, financial fears of the markets.
“If it does (invade Ukraine), it will go down hard, sending energy prices up and stocks down.”Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, noted yesterday.
And it is that yesterday the US markets were closed for Presidents’ Day, but in Europe and Asia the actions did end down due to the latest movements of Russia. Although the US announced economic sanctions for Russia if it invades its neighboring country, the tension is beginning to be seen in the oil and gas industry.
The impact is summed up in an analysis of data collected this week; For example, on Friday, US stocks recorded million-dollar losses due to the fact that investors need refuge assets to overcome the period of geopolitics that these countries are going through and increase their need for financial security.
How would it affect Mexico?
The economic and operational impact that the different industries could have due to the European conflict between Russia and Ukraine does not exclude our country.
- Gas price increase
The Kremlin is the main supplier of gas in Europe, since almost 40 percent of what is consumed in Europe comes from Russian fields, one of the most important points in the Russia-Ukraine conflict.
Therefore, it is not surprising that Russia has mainly threatened to “turn off the gas tap”, which reaches European territory precisely below the Ukrainian territory.
However, the United States offered to provide this input, which is necessary in the event that a major conflict breaks out and, if this were to happen, it would be Mexico that should bear in mind its status as an importer, since with the global lack of this energy, it is most likely that it will be reflected in an increase in price.
To a certain extent, the rise in the cost of electricity, diesel and gasoline in Europe has benefited our country, since a barrel of Mexican crude oil has already positioned itself at 80 dollars more than the budget that had been proposed for 2022.
“With oil prices already at multi-year highs due to the misalignment of supply and demand dynamics, further stress could mean more upside potential (above $100) which could have a negative impact on both oil and gas. the US economy as well as the world economy.”
“While we remain optimistic that a diplomatic resolution and/or de-escalation will eventually be achieved, this is not a certainty with tensions high. A favorable outcome would reduce the current geopolitical risk premium built into oil prices (by at least $5-$10) and return oil closer to our year-end target of $80,” said Larry Adam, chief investment officer. of PrivateClient. Group at Raymond James.
- Fear in international markets
The perception of risk in international markets has grown exponentially in recent weeks, derived from the military conflict that is taking place in relevant areas of Ukraine, so it is expected that, if uncertainty continues or a war breaks out, businessmen will stop to invest.
Likewise, the pressure on inflation would cause the central banks to increase their interest rates and it would be impossible for the impact and the “coup” not to reach Mexico, where our currency could be drastically injured.
However, the increase in risk is already beginning to be seen in the Vix index, which marks the volatility of international markets, because although it is still far from the 66 points it reached at the beginning of the Covid-19 pandemic, until today It already oscillates at a level of 27 points.
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