War in Ukraine is a ‘serious inflation story’ as oil faces huge hole: RBC

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  • The war in Ukraine is sending oil and commodities skyrocketing, which could have serious implications for inflation, said RBC’s chief commodities strategist.
  • “This is a serious, serious inflation story,” Helima Croft told CNBC on Friday.
  • Other countries will struggle to close the gap in the oil market as companies sanction themselves against Russia, she said.

Soaring oil and other commodity prices will put strong pressure on inflation, according to Helima Croft, head of global commodity strategy at RBC Capital Markets.

While Western sanctions on Moscow have avoided directly targeting Russia’s energy exports, companies are still choosing on their own to avoid doing business with the country, or “self-sanctioning”.

In an interview with CNBC on Friday, Croft referenced a new report from the Oxford Institute for Energy Studies that found self-sanctions alone could send more than 70% of Russia’s energy exports off the ground.

That would leave a “very serious hole” in the oil market that other producers like the United States or OPEC cannot easily fill, she warned. Meanwhile, wheat prices have risen to their highest levels since 2008, and shipments from major grain producer Ukraine are at risk as some ports there will be inoperative, she added.

“This is a serious inflation story,” Croft said.

Since Russia invaded Ukraine last week, commodities have soared. Along with oil and grain, metals like nickel, aluminum and palladium surged.

On Friday, JPMorgan warned that a shortage of key metals could put the automotive and semiconductor supply chain at risk.

Croft, who called Russia a “commodities hypermarket,” also suggested that the inflationary effects of the war in Ukraine won’t go away anytime soon.

“It will not be a short-lived conflict,” she said.

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