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Oil, gas and wheat prices are up following Russia’s invasion of Ukraine

What PM Boris Johnson described as Russia’s “vast invasion” of Ukraine is set to have grave implications for energy and food prices, analysts have warned.

“The prices of brent, precious metals and wheat are already firmer,” said Mintec’s Zanna Aleksahhina in the hours following Russia’s attack on its neighbour.

The early-morning invasion by Russia, one of the world’s leading sources of oil, gas, metals and food commodities such as wheat, sparked an immediate spike in energy prices, with oil topping $100 a barrel and gas rising by 40% by midday.

Alex Waugh, director general of UK Flour Millers, said the price rises would have “knock-on impacts on energy-intensive products, such as fertliser” and in turn would add to pressure on food prices.

“The implications are very great for food commodities,” said Rabobank senior commodities analyst Michael Magdovitz.

Wheat, of which both countries are leading suppliers, also saw price rises, with European futures up around 20%.

“Ukraine is a critical supplier of wheat, corn and sunflower oil among other products and its ports are closed. The world is seeking to fulfil the demand elsewhere and driving prices up of replacement commodities,” Magdovitz explaned.

The invasion marked “a dangerous day for global food security & food prices too”, according to James Withers, chief executive of Scotland Food and Drink. ”Ukraine is known as the bread basket of Europe for good reason,” Winters said in a social media post.

“The likely disruption to wheat and corn prices will plausibly push up agricultural food prices, which are already around 30% higher than a year ago, higher still,” said Tatiana Orlova, lead economist with Oxford Economics.

”Given the scale and severity of the risks, we have also raised our near-term forecasts for most agricultural commodities by around 25%”, Capital Economics said on Thursday.

The invasion of Ukraine was taking place “by land, by air and by sea”, according to Johnson, meaning Russia could be about to quickly overrun Ukrainian farmlands and critical infrastructure.

Russia-Ukraine: What impact could conflict have on food prices?

“There is plenty of concern if this becomes a protracted battle and disrupts Black Sea agricultural markets for an extended period of time,” Magdovitz said.

Countries in the Middle East and North Africa are particularly reliant on grain shipped across the sea. Shortages and price rises in the past led to social unrest and political instability across the region.

PM Johnson said European reliance on Russian energy exports must end and declared “a massive package of economic sanctions designed in time to hobble the Russian economy” would be cobbled together by NATO members.

Russia could retaliate by stopping gas exports, driving up already rampant consumer price inflation and threatening fuel shortages that could see Europeans struggle to heat their homes in winter.

Russia’s “pivotal role in global energy supply cannot be downplayed”, according to Capital Economics.

Any Russian move to cut gas supplies to Europe would lead to a ”serious energy crisis” across the contiinent,  according to Eurasia Group, which warned earlier this week that “governments may be forced to order energy-intensive industries like steelmakers or auto manufacturers to reduce output”.

”Household energy rationing” could be needed ”to avoid uncontrolled blackouts”, Eurasia Group’s analysts said.