With the Russian/Ukrainian crisis dominating world headlines, particularly over the past week, investors have been spooked, to say the least.
In response, the S&P/ASX 200 Index (ASX: XJO) has shed 3.73% since last Thursday to currently trade at 7,024 points.
Tensions have been heating up between the West and Russia, with a number of countries imposing sanctions on the Kremlin. This follows Russia's latest move in sending "peacekeeping" soldiers into the Ukrainian regions of Donetsk and Luhansk. This occurred after Russian President Vladimir Putin recognised them as independent republics.
It's worth noting that this is a similar Russian 'playbook' move that occurred in 2008 when forces moved into Georgia. The Kremlin had previously recognised the Russian-backed self-proclaimed republics of South Ossetia and Abkhazia.
Georgia fought back, sending its military into the hotly-contested provinces. The outcome? Russia invaded Georgia in the days following, sending global stock markets into panic mode.
Fast forward to today, and we look at one expert's theory on which commodities will boom if an invasion occurs.
How important is Russia in terms of commodities?
To say that Russia is an important energy supplier is an understatement. The country provides much-needed gas and oil to Europe and in particular, the bloc's largest economy, Germany. The latter depends on Russia for 49% of its natural gas needs, while Italy receives about 46%. France, on the other hand, collects just over 24%.
Based on a Eurostat report in 2019, Europe depends on Russia for 27% of crude oil and 47% of solid fossil fuel imports.
As a whole, Russia exports roughly 10% of its oil, 20% of its gas, and 20% of its thermal coal around the world.
Which commodities could receive further tailwinds?
According to Blue Line Futures' chief market strategist, Phil Streible, investing in the above commodities could yield profits amid the heightened geopolitical tensions.
Commenting on possible sanctions targeting Russian energy by the United States and United Kingdom, Streible said:
What [the Russians] would do is they would divert their oil. Instead of selling it into the current export structure that they have, they could easily make agreements with other countries to buy that oil, like China. Also, they can take off some of that oil, they can hold back. There's no reason for them necessarily to sell, they have too many other key commodities that prices can drive up on.
With the supply of oil and gas crunched, crude oil prices could spike to north of $100 a barrel, up to $120.
In addition, Streible talked about other strategic metals which might rise in price if the situation escalates. They include palladium, copper, and cobalt.
He added:
[Russia] is the number two producer of platinum, number one producer of palladium, they are the number three wheat producer.
Look at a chart of wheat. It has broken out to the upside, it is up about 4.85% year-to-date as of this reporting right now, and it is blowing away all the other grains that are out there.
They produce 3.5% of the word's copper. With EV demand increasing, copper is one of the main components out there…and they produce 4% of the world's cobalt, which are used in those batteries for EVs.
So, Russia is a very strategic country when it comes to commodity production, commodity exports, and the direction of the global economy.
