Oil and gas prices are set to increase due to European reliance on Russian gas, with petrol estimated to rise to £1.55 a litre in coming weeks. Meanwhile, Ukraine’s status as the “bread basket of Europe”, due to its high grain exports, will have a major impact on the price of food.
Oil prices jumped 7 per cent in early trading as news of the Russian invasion broke, while natural gas prices rose by 32 per cent.
Ukraine accounts for 12 per cent of global wheat exports, 16 per cent of corn and 18 per cent of barley exports.
Analysts said the Black Sea region’s status as a major cargo route could also have a massive impact on food inflation, if sea transport is disrupted, and warned UK inflation could rise beyond the 7.5 per cent expected in April.
The crisis comes as Scottish households are bracing themselves for an expected hike in the cost of living, due to an increase in the energy price cap due to come into force in April.
Experts said in addition to grains themselves, the price of pre-prepared foods with wheat as a main ingredient, such as bread, cereal, crackers, pancakes and pizza, could be affected worldwide.
James Withers, chief executive of Scotland Food and Drink, said it was a “dangerous day” for global food security, also pointing to Ukraine’s prominence as a fertiliser producer.
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He said: “Ukraine is known as the bread basket of Europe for good reason. It accounts for 12 per cent of global wheat exports, 16 per cent of corn and 18 per cent of barley.
"Be in no doubt, this is a dangerous day for global food security and food prices too, with humanitarian risks that stretch far and wide.”
He added: “Black Sea routes are really critical in terms of supplying things like grain to the Middle East, Europe and the rest of the world.”
Mr Withers said food price inflation was already at an unprecedented level.
He said: "There is a level of inflation in the food supply chain that I haven’t seen in my lifetime – it’s already happening.
“World markets can react very sharply to problems in the food supply system. Here, there is military action in a country which has grain and other critical commodities – which is a perfect storm on top of other rising costs. It is a worrying development.”
Germany halted the certification process of undersea pipeline Nord Stream 2 earlier this week, following Russian president Vladimir Putin’s incursion into eastern Ukraine.
The pipeline, meant to ferry natural gas directly from Russia to northern Germany, is owned by a subsidiary of Russia’s state-owned Gazprom. A total of 40 per cent of Europe’s natural gas and 30 per cent of its oil supplies come from Russia, which will push global prices higher amid rising demand for utilities sourced outwith Russian borders.
RAC fuel spokesman Simon Williams said: “Both petrol and diesel reached new record levels yesterday. Unleaded is nearly 149.5p a litre and diesel almost 153p.
"Russia’s actions will now push petrol pump prices up to £1.50 very soon. The question then becomes where will this stop and how much can drivers take just as many are using their cars more and returning to workplaces.
“If the oil price was to increase to $110, there’s a very real danger the average price of petrol would hit £1.55 a litre. This would cause untold financial difficulties for many people who depend on their cars for getting to work and running their lives as it would skyrocket the cost of a full tank to £85.”
Ofir Sahar, chief executive of www.Insuranks.com, said the conflict could raise rates in various sectors across the world, ranging from the price of food to insurance rates and stocks – as well as pushing the price of gold higher.
He said: “Any large-scale conflict will have a significant impact on the global stock market. Investors will be looking to minimise risk and place their funds in assets seen as ‘safe’, such as gold.
"With tensions between Russia and Ukraine rising, the demand for gold has already begun to increase in recent weeks and could continue to do so. In addition to this, businesses based in Eastern Europe and Russia could have a massive financial hit due to a crash in their stocks, as investors will be looking to get away from the impact of any economic collapse in the future.”
Thomas Pugh, economist at RSM UK, said: “Looking beyond the immediate humanitarian impact, the effect on the UK economy will depend on what happens next and how long commodity prices remain elevated for."