The long and short of it: Russia’s war unleashes unique commodity shock

In short:

Commodity price cycles are usually gradual, but surges are rarely across the board. Rising GDP growth and demand tend to generate gradual price rises and “super-cycles”. Supply shocks tend to cause price surges, which destroy demand, leading to supply gluts and price collapses.

Russia’s war in Ukraine is upending global commodity markets in two unusual ways:

1. An across-the-board price surge in metals, minerals, grains, energy, inputs and intermediates.
2. Conflict, sanctions, and regional restrictions are restricting supply and may support prices over time.

This unusual commodity context suggests: “high-flation” now; high costs in future; commodity market regionalisation; diverse macro policies and performance on commodity importer/exporter differentiation; relative-value shifts in currencies and asset classes.

To read the ‘long’ of it, click below.