One year on from the invasion of Ukraine: market analysis from Janet Mui, RBC Brewin Dolphin

by | Feb 24, 2023

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One year ago today, the world awoke to news that Russia had actually begun the invasion of Ukraine. The terrible consequences of war for the brave people of Ukraine has not been far from our news headlines and thoughts ever since. The war has also had severe implications for the rest of the world. In this blog, Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin, reflects on the economic impacts of the war one year on, commenting:

Few would have expected such resilience in markets and the European economy, one year on from the start of the war in Ukraine. The most direct impact of the war was the disruption in supply in commodities, ranging from oil and natural gas to wheat and aluminium. Many European states were in ‘crisis mode’ not only because of the unprecedented gyrations in gas prices, but also the existential threat of a cut-off in gas supply from Russia.

The crisis prompted a speedy diversification of energy supplies and most notably LNG (liquefied natural gas) imports from the US. A mild winter and a reduction in energy demand helped gas storage remain ample, so the worst-case scenario was averted. The energy support to households put in place by many European states, pandemic savings and a resilient labour market kept the economy going in 2022.

“Markets panicked initially because of the geopolitical and energy supply uncertainty, but gas prices, oil prices, European equities and the euro have made a round trip from the abyss and back. Both the European benchmark natural gas prices and oil prices are now lower than the levels at the start of the war. The Eurostoxx 50 index entered a bear market in 2022, however, it staged a remarkable rebound to surpass its level from a year ago. Sentiment on the Euro area was so poor that at one point, the euro traded below parity versus the US dollar but has since bounced over 10% from its trough in September 2022. The lesson here for investors is that there is merit in not over-reacting and panicking from market volatility induced by geopolitical events.


“That said, there will be more lasting impacts on the markets. Global bond yields have risen sharply from a year ago, as central banks embarked on aggressive rate increases to curb inflation, which remains stubbornly high. While economic activity is better than expected, the lagged impact of rate increases and the squeeze on consumers from high inflation means a recession remains likely toward the end of 2023.  As the war goes on, development remains highly uncertain and may still periodically disrupt markets. Whichever the direction of the war, the west will not go back to Russian fossil fuel. The longer-term implication is a revamp of global energy supply chains and an accelerated transition to renewable energy.”

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