Russia-Ukraine conflict not a global economic risk

Wells Fargo Research Team Wells Fargo

Summary

Tensions tied to the Russia-Ukraine situation have intensified in recent days. Although we do not have any particular insight into conditions on the ground or wish to speculate on the mindset of leaders involved, assessing the potential economic and financial market reaction to an escalation is still a valuable exercise. In our view, global economic growth is not at risk should Russia and Ukraine enter recession as a result of conflict and/or international sanctions. However, oil prices could move higher as a result of Russia supply disruptions, which could weigh on purchasing power and result in energy shortages, particularly within the European Union. Oil prices are a key influence for Russia, and current supply/demand dynamics suggest oil prices could move higher, especially if sanctions are imposed on Russia. Should oil prices remain steady or move higher, we believe the Russian economy and local financial markets will be more protected relative to 2014 even if sanctions are imposed, while the ruble selloff will likely be more contained.

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Wells Fargo Research Team

Wells Fargo

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