Russia’s invasion of Ukraine and the resulting international backlash has plunged energy markets into chaos, threatening dire economic consequences that rival those of the 1970s oil shocks.

Bloomberg’s gauge of raw materials was set for its biggest weekly gain since at least 1960 as sanctions on Russia scared off buyers. Coal racked up an unprecedented 80% rally, European natural gas broke price records and oil futures swung in the widest range in three decades.

“You don’t shut down the second-largest commodity producer in the world and not expect bad things to happen,” said Jeff Currie, head of commodities research at Goldman Sachs Group. Russia’s sudden economic isolation is choking off a major global source of energy, metals and crops. It’s threatening the country’s very foundations and raising fears of something the developed world hasn’t suffered in decades – acute inflation and real energy shortages.


In just over a week, an almost unthinkable event has become the new reality for one of the world’s largest commodity exporters.

“Russia is being disconnected from the world economy,” Daniel Yergin, an oil and gas historian and vice chairman of consultants IHS Markit, said. “The process that began in the 1990s of Russia connecting with the world economy, being integrated with the world economy, is very rapidly going into reverse.”

The consequence has been energy-market mayhem. Roughly two-thirds of the country’s supplies were off-limits, JPMorgan estimated, potentially putting the oil price on track to hit $185 a barrel by the end of the year. The drop in Russia’s oil exports could ultimately resemble the meltdown that engulfed Iran from 1978 to 1979, when its petroleum sector buckled under the twin pressures of revolution at home and an asset freeze by the US government, Goldman’s Currie said.


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