Russia’s invasion of Ukraine has economic repercussions globally and in the United States, ramping up uncertainty, roiling commodity markets and potentially pushing up inflation as gas and food prices rise around the world.

Russia is a major producer of oil and natural gas, and the geopolitical conflict has sent prices of both sharply higher in recent weeks. It is also the world’s largest wheat exporter and is a major food supplier to Europe.

The United States imports relatively little directly from Russia, but a commodities crunch caused by a conflict could have knock-on effects that at least temporarily drive up prices for raw materials and finished goods when much of the world, including the United States, is experiencing rapid inflation.

Russian forces attacked Ukraine overnight in a combined assault by land, sea, and air — the largest European invasion since World War II.

Late Wednesday night in the US, President Joe Biden condemned what he called an “unprovoked and unjustified attack by Russian military forces,” following reports of troops crossing the border and explosions in multiple cities, including the capital, Kyiv.

“Russia alone is responsible for the death and destruction this attack will bring, and the United States and its Allies and partners will respond in a united and decisive way. The world will hold Russia accountable,” Biden said in a statement.

The invasion has obvious ramifications for political stability in Europe and around the world. But it is also straining a global economy already weakened by inflation, rising energy prices, the ongoing pandemic, and a constrained supply chain.

stock markets around the world tanked after Russian President Vladimir Putin invaded Ukraine, underscoring raising concerns that a prolonged war will wreak havoc on the economic system. For instance, shares in tech giants Apple and Microsoft dropped on news of the war, a bad sign considering that those titans are generally considered to be bellwether companies. 

Still, it’s unlikely the world economy will stoop to the sudden, shocking lows from the onset of the COVID-19 pandemic, when investors panicked over the sudden halting of global supply chains and a deadly virus for which the populace, at the time, lacked preventive vaccines.  

The energy markets are messed up

Through Gazprom, its state-owned energy giant, Russia is a major provider of natural gas to Europe. It delivers gas via a huge pipeline that runs through Ukraine.

In a surreal turn of events, Western European nations paid Russia for gas being piped from Russia through Ukraine, even as Russian tanks entered Ukrainian territory and fighting broke out. Investors immediately concluded this wouldn’t stay the case for long.

Inflation is set to go even higher

Inflation has surprised economists—and the Biden administration—by climbing to heights unseen since the early 1980s, as COVID vaccines unleashed waves of economic spending that supply-chain snarls haven’t been able to keep up with.

Pain at the pump

The most obvious costs to Americans will be at the gas pump.

Russia produces approximately 12% of the world’s oil and 17% of its natural gas. That makes it the world’s third-biggest producer of oil and second-largest for gas. It’s also the biggest supplier of natural gas to Europe, which gets nearly half of its supply from Russia.

The risk is that Russia might cut off gas or oil supplies to Europe or other countries that issue sanctions or otherwise condemn its actions in Ukraine.

Europe may face the most immediate effects if some of Russia’s energy supplies are removed from the world market – which is why the U.S. has been trying to assure its allies it can supply them with liquid natural gas to make up for any shortfall. But world petroleum markets tend to be highly integrated, so the U.S. won’t be immune. 

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