Everyone agrees that war is a sad state of affairs. Unfortunately, international relations have a way of breaking down, as in the current case of Russia and Ukraine. The two nations have been at odds since the Russian invasion in February. Individuals can do little to bring about an end to major forms of hostility, but they can adjust their trading habits in order to avoid financial losses. That’s what’s happening in the commodities markets, where millions of individuals have begun to calibrate and otherwise adjust their strategies for buying and selling assets like grain, oil, natural gas, metals, and fertilizer.
It’s not a matter of profiting from military conflict but more a case of protecting one’s capital when major nations are engaged in hostilities. For traders, the key questions revolve around which assets have been most impacted by the conflict, how export restrictions play a role in the crisis, whether currency prices and forex trading are affected, and what the current best opportunities are for traders and investors. Here are details about essential facts every commodity trading enthusiast should know about the Russia-Ukraine situation.
Which Commodities Have Been Most Affected?
For trading enthusiasts who like to keep their categories straight and set priorities in terms of price changes, there are several ways to look at the situation. First, the war has impacted dozens of assets, not just petroleum and various agricultural sectors. What are the ones that have been hit the hardest in terms of price increases? Fertilizer tops the list, followed by energy, oil, metals, and agricultural grains. All have risen in price between 20% and 70 percent since the beginning of hostilities in February 2022. One thing to keep in mind is that because the war has lingered on for several months, many of the price increases could become long-term results.
In other words, those who hoped a quick cease-fire or peace conference would stave off higher prices have been disappointed. Those who buy and sell commodity-based assets regularly already know that even in turbulent environments, there are strategies for playing the market profitably. In fact, savvy investors who leverage the power of the metatrader 5 trading platform and other technology that lets them make fast, targeted transactions are heavily involved in the wartime commodities marketplace.
What’s the Deal with Export Restrictions?
It’s essential to observe and learn from the jostling and politicking that takes place in markets during a war. Numerous nations have begun to set export restrictions in order to protect their stores of assets like oil, gold, natural gas, etc. In general, when there are export restrictions in place, the global economy is in a pretty bad state. It’s an indicator that at least some national governments don’t feel like they can rely on international markets as a source for vital commodities. This kind of fear-based protectionism is one of the reasons that energy costs have gone up by the largest percentage in almost 50 years. Not since the oil shock of 1973 have petroleum and natural gas prices risen so much.
How Forex Markets Are Related to Commodities
Forex prices are inextricably linked to commodity sectors in a number of ways. For nations whose currency strength is tied directly to just one or two commodities, a change in the underlying price of the asset can have a profound and instant effect on that country’s currency value. If you trade forex, be sure to follow the Russia-Ukraine war news on a regular basis.
Opportunities for Traders
Even when you are investing during a recession, opportunities flourish for anyone interested in buying, selling, or holding petroleum, precious metals, grains, natural gas, and several other assets that have been deeply impacted by the ongoing hostilities. However, volatility and war can be tricky. At any moment, the conflict could end, or it could drag on for years. There are potential profits in making correct predictions about near-term and long-term price movements. If your research tells you that oil has topped out and will soon drop, then you could choose to short it or sell CFDs (contracts for difference) as a way to earn money on the decline. Likewise, if you believe the war will continue and petroleum will become costlier, then there are a number of ways to go long. They include purchasing oil, oil stocks, or CFDs.
Hottest Commodity Picks for 2022/23
Precious metals like gold and silver, along with petroleum-based commodities like heating oil, gasoline, and diesel fuel, are among the year’s hottest asset classes for several reasons. The war is paramount in influencing their prices. Gold and silver, while not currently in a bullish stance, have the potential to rise considerably as the military hostilities continue, world inflation gets worse, or the supply chain crisis drags on.