Commodities rallied to record level as Russian invasion in Ukraine continues to tumble major asset classes.
Tensions in between Russia-Ukraine escalated on Friday after an fire broke out in a nuclear plant in Ukraine, which is the largest in Europe. According to Bloomberg, prices of aluminum and wheat rose underscoring commodity prices running the most in weekly basis since 1974.
Growing isolation of Russia by global economies puts an commodities from energy, metals and crops at supply constrain, heightening the risk of further shortages. Trader, banks and shipping lines are avoiding business with Russia amid payment difficulties. On the other hand, shipping lines are avoiding booking from the region.
According to Ukraine’s officials, the largest nuclear power plant in Europe came under fire after Russian troops shelled the facility.
West Texas Intermediate oil jumped almost 5% to extend gains this week. Global buyers are shunning Russian crude and fuels, sparking a race for alternative supplies.
The International Energy Agency warned that global energy security is concerned as coordinated strategic release of oil filed to solve supply concerns.
JPMorgan Chase & Co. said global benchmark Brent crude could end the year at $185 a barrel if Russian supply continues to be disrupted. Prices were at about $114 on Friday.
Meanwhile, wheat prices soared to a level last seen in 2008 as Ukraine war cuts off quarter of world’s export of wheat. Futures jumped by the exchange limit in Chicago, rising 6.6% to $12.09 a bushel.
The attack at the nuclear plant could worsen the risks to Ukraine’s agricultural production,
“Recalling that food from the Chernobyl area is still not edible — over 35 years after that nuclear accident — the potential for long-term negative impacts on Ukrainian agriculture from high radiation due to nuclear power plant bombings could be significant,” said Jason Schenker, president of Prestige Economics.
Aluminum, one of the most energy-thirsty metals, rose as much as 3.6% to $3,850 a ton on the London Metal Exchange, a fresh record. Copper is also closing in on its all-time high.
U.S. gas futures rose as much as 4.3% to head for a third weekly increase, bolstered by European demand for American cargoes of liquefied natural gas.
Iron ore futures in Singapore are set for a 16% gain this week, the biggest in more than three months, amid growing expectations of a pickup in demand from China’s economy.
