The threat of Russia’s invasion of Ukraine could have economic repercussions globally and in the United States, increasing uncertainty, rattling commodity markets and potentially pushing up inflation as prices gas and food are increasing in the world.

Russia is a major producer of oil and natural gas, and the brewing geopolitical conflict has driven prices up for both in recent weeks. It is also the largest wheat exporter in the world and one of Europe’s main food suppliers.

The United States imports relatively little directly from Russia, but a conflict-induced commodity crisis could have repercussions that would at least temporarily raise the prices of raw materials and finished goods when much of the world, including including the United States, is experiencing rapid inflation.

Global unrest could also spook American consumers, prompting them to cut back on spending and other economic activities. If the downturn becomes severe, it could be more difficult for the Federal Reserve, which plans to raise interest rates in March, to decide how quickly and how aggressively to raise borrowing costs. The central bankers noted in the minutes of their last meeting that geopolitical risks “could drive up global energy prices or exacerbate global supply shortages”, but also posed a risk to the outlook for growth.

The scale of the potential economic fallout is unclear, as the scope and scale of the conflict remain all but certain. But foreign conflict could further delay a return to normal after two years in which the coronavirus pandemic has rocked both the global and US economies. Tension between Russia and Ukraine escalates as US consumers already face rapidly rising prices, companies try to navigate disrupted supply chains and people say they are pessimistic about their financial outlook despite strong economic growth.

“The level of economic uncertainty will increase, which will be negative for households and businesses,” said Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics. He noted that the effect would be felt hardest in Europe and, to a lesser extent, in the United States.

A major and immediate economic implication of a confrontation in Eastern Europe relates to oil and gas. Russia produces 10 million barrels of oil a day, around 10% of global demand, and is Europe’s largest supplier of natural gas, which is used to fuel power stations and provide heat to homes and businesses .

The United States imports relatively little Russian oil, but energy commodity markets are global, which means that a change in price in one part of the world influences the price people pay for energy elsewhere.

It’s unclear how much a conflict would push prices up, but energy markets have already been jittery – and fuel prices have risen sharply – at the prospect of an invasion.

If oil rises to $120 a barrel by the end of February, past the $95 mark it hovered around last week, inflation as measured by the consumer price index could climb to almost 9% over the next two months, instead of a currently projected peak of just under 8%, said Alan Detmeister, an economist at UBS who previously led the prices and wages section at the fed.

“It becomes a question of: how long do oil prices, wholesale natural gas prices stay high?” he said. “It’s someone who guesses.”

The $120 a barrel mark for oil is a reasonable estimate of potential price upside, said Patrick De Haan, head of oil analysis at GasBuddy. That would translate to about $4 per gallon at the pump on average, he said.

It may be difficult to determine to what extent the change in energy prices is attributable to the emerging conflict. Omair Sharif of Inflation Insights noted that oil and gas prices have already risen this year.

“I don’t know when you want to start the clock for Ukraine to become a big title,” Mr Sharif said. Moreover, from the point of view of US inflation, the importance of the conflict “depends on the involvement of the United States”.

Oil is perhaps the major element in terms of the inflationary effects of a Russian conflict, but it is not the only one. Ukraine is also a major producer of uranium, titanium, iron ore, steel and ammonia, and a major source of arable land in Europe.

Christian Bogmans, an economist at the International Monetary Fund, said a conflict in Ukraine could further inflate global food prices, which were expected to stabilize after soaring last year.

Russia and Ukraine together are responsible for nearly 30% of global wheat exports, while Ukraine alone accounts for more than 15% of global corn exports, he said. And many Ukrainian wheat and corn producing regions are near the Russian border.

Rising gas and fertilizer prices, as well as droughts and severe weather in some areas, such as the Dakotas, had already helped push up the world price of wheat and other commodities. Ukraine is also a major producer of barley and vegetable oil, which is used in many packaged foods.

“In the event of a dispute, production could be halted and shipping could also be affected,” Bogmans said. If other countries impose sanctions on Russian food products, it could further limit global supply and inflate prices, he said.

But since food prices only account for a small part of inflation, it may not matter as much for overall price data, UBS’s Detmeister said. It is also difficult to guess exactly how import prices would form due to potential currency fluctuations.

If a conflict fuels global uncertainty and causes investors to pump money into dollars, driving up the value of the currency, it could make US imports cheaper.

Other business risks loom. Unrest at the crossroads of Europe and Asia could pose a risk to supply chains that have been disrupted by the pandemic.

Phil Levy, chief economist at Flexport, said Russia and Ukraine were far less tied to global supply chains than China, but conflict in the region could disrupt flights from Asia to the United States. Europe. That could pose a challenge for industries that transport products by air, such as electronics, fast fashion and even automakers, he said at a National Press Foundation event Feb. 9.

“Air has been a way around supply chain issues,” Levy said. “If your factory were to close because you don’t have a key part, you could fly into that key part.”

Some companies may not yet realize their true exposure to a potential crisis.

Victor Meyer, chief operating officer of Supply Wisdom, which helps companies analyze the risks in their supply chains, said some companies were surprised by the extent of their exposure to the region during the invasion. from Ukraine in 2014, when Crimea was annexed.

Mr. Meyer noted that if he were the head of security for a company with ties to Ukraine, “I would campaign pretty strongly to unwind my exposure.”

There could also be other indirect effects on the economy, including a drop in consumer confidence.

Households are sitting on cash reserves and could probably afford higher prices at the pump, but rising energy costs are likely to make consumers unhappy as prices overall are already rising and the economic sentiment faded.

“The hit would be easily absorbed, but it would make consumers even more miserable, and we have to assume that a war in Europe would also directly depress confidence,” Pantheon Macroeconomics’ Ian Shepherdson wrote in a Feb. 15 note.

Another risk to U.S. economic activity may be underestimated, Obstfeld said: the threat of a cyberattack. Russia could respond to US sanctions with digital retaliation, disrupting digital life at a time when the internet has become central to economic existence.

“Russians are the best in the world in this area,” he said. “And we don’t know how deep they got into our systems.”