Tensions are running high right now between Russia and Ukraine. Across the Atlantic, the United States is watching closely. President Joe Biden has indicated that the U.S. will take action if necessary. While his administration considers sending troops to Eastern Europe, American investors are left to consider what intensifying Russia-Ukraine conflict could mean for financial markets.
The U.S. has seen enough market turbulence recently. This week began with cryptocurrencies plunging across the board as rumors of a market crash caused investors to question their stability. There’s also been plenty of speculation that a stock market crash could be coming. It’s no secret that geopolitical conflicts often shake markets. In times of unrest, the natural instinct for many is to focus on bonds, seeing them as the safer investment vehicle. In a case such as this, though, investors should consider what conflict could mean for their stock and crypto portfolios.
The way it looks from here, there are three primary ways in which the Russia-Ukraine conflict will affect stock and crypto markets. Let’s take a closer look at each one.
The Russia-Ukraine Conflict: Agriculture on Watch
One growing concern is food affordability. It was a rising problem across international markets in 2021. If the Russia-Ukraine conflict continues to escalate, though, we could see the prices of agricultural exports rise even further. Both countries are known for producing wheat and grain. Farmers in the Black Sea region of Eastern Europe began sowing with a positive industry outlook in April 2021 and it was predicted that both countries could set wheat production records for 2021 and 2022. One year later, things look much less rosy.
As major grain exporters who ship from Black Sea ports, both Russia and Ukraine could face even further supply chain disruptions if military sanctions are implemented. The same applies for fellow grain exporters Kazakhstan and Romania. Reuters reports that according to the International Grains Council, Ukraine was projected to be “the world’s third largest exporter of corn in the 2021/22 season and fourth largest exporter of wheat.”
Supply chain disruptions and inflationary trends were both posing risks to stocks in the agricultural field already. It doesn’t stop there, though. Roy Harvey, CEO of prominent American steel producer Alcoa Corporation (NYSE:AA), has warned that the Russia-Ukraine conflict is likely to affect the global materials market.
Russia is the world’s second-largest aluminum producer, and while Ukraine is ranks only No. 13 on that list, 80% of its steel output is exported. Since the U.S. is the world’s largest steel importer, any disruptions from either country could prove severe. For companies like Alcoa, this could certainly mean a difficult year for as long as the conflict persists.
6 Agriculture and Materials Stocks to Watch
These disruptions in the international supply chain, though, could provide a unique opportunity for U.S.-based grain producers to sell more product domestically. This opportunity extends to companies that provide farmers with seeds and equipment. Industry giant John Deere (NYSE:DE) could certainly benefit, but there are other names worth noting.
Here are some agricultural and material stocks to watch if the Russia-Ukraine conflict continues.
- John Deere (NYSE:DE)
- Bunge Limited (NYSE:BG)
- Calavo Growers (NASDAQ:CVGW)
- Cleveland-Cliffs (NYSE:CLF)
- United States Steel (NYSE:X)
- Nucor Corporation (NYSE:NUE)
The Russia-Ukraine Conflict: Cryptos Spiral on Threat
The effects of the intensifying Russia-Ukraine conflict are certainly not confined to stocks. The current crypto crash was fueled in part by speculation of a ban on crypto use and mining from Russia’s central bank. While it stands to reason that Russian President Vladimir Putin wouldn’t support anything that takes away his control, the proposal has drawn steep criticism from several Russian executives.
Regardless of the verdict, this type of speculation hasn’t been good for crypto markets. Bitcoin (CCC:BTC-USD) has plunged to a six-month low today. If the king of crypto is falling, it’s a safe bet that others will as well. Indeed, both Ethereum (CCC:ETH-USD) and Binance Coin (CCC:BNB-USD) are also into the red today as are many smaller cryptos.
This isn’t entirely due to the news out of Russia. Interest rates are likely to rise soon, and when they do, many investors are compelled to sell off high-risk assets. Seen as being less stable, crypto is a tempting target in such circumstances. According to Mark Elenowitz of Horizon Fintex, “Bitcoin will face headwinds going back up until the macroeconomic conditions change.”
In this case, macroeconomic conditions involve a potential geopolitical conflict that will cause turbulence for all financial markets. While cryptos have several factors working against them, the stocks of companies in the crypto space will continue to struggle too. As can be expected, Coinbase (NASDAQ:COIN) has been declining all day. Here are a few more companies in the space to watch as the Russia-Ukraine conflict continues.
Russia-Ukraine Conflict: What Happens to Oil and Gas?
There’s one more sector that is bracing for turbulence as the Russia-Ukraine conflict draws on. According to Reuters, 35% of Europe’s natural gas is provided by Russia. The much larger country’s location puts it in a critical place for oil pipeline flows into Eastern Europe.
The same article notes that a JPMorgan analyst has warned of the consequences of a material spike in oil prices. According to this report, raising oil prices to$150 per barrel would send global gross domestic product (GDP) growth falling to 0.9% for the first half of 2022. This same trend could cause inflation to rise to 7.2%.
While it’s presently unclear what the U.S. will do, one thing is clear. If Biden were to choose to enter the Russia-Ukraine conflict, it would likely mean further U.S. sanctions on Russian resources. Experts have told CNN that such events would send gas prices rising. In anticipation, investors are likely to employ bullish plays on oil and natural gas stocks. While the sector is down today, Devon Energy (NYSE:DVN) remains in the green. Experts have also touted names such as ConocoPhillips (NYSE:COP) and BP (NYSE:BP) among oil stocks to watch.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.