Talk of Embargo on Russian Oil Sees Crude Hit $140, Exacerbating Inflation Fears

Macroeconomic Analysis

Reports of the US mulling a ban on the exports of Russian oil has rocked markets, sending the price of crude oil up to $140 a barrel and causing equities to tumble amid fears of already high inflation becoming even more exacerbated. 

With the diplomatic option long since closed and with Russia’s invasion of Ukraine showing no sign of slowing, the US is said to be in discussions with Japan and European countries about an embargo on Russian oil as the latest financial sanction to be levied against the country.

While the sanctions up until now have tried to minimize the collateral impact their imposition would have on the rest of the world, given Russia’s central importance in global oil supplies, this latest mulled measure would leave the world scrambling around to find alternative supplies with the possibility of the embargo on Venezuelan oil being lifted to offset the Russian one. 

As the cost of living continues to rise, investors will look to see the reaction by central banks with Wednesday bringing the European Central Bank’s interest rate decision followed by the latest US inflation figures on Thursday. 

Gold Price Analysis

A fresh crisis on markets, this time triggered by talk of an embargo on Russian oil, has seen gold gain once again to now be challenging the hugely significant level of $2,000 an ounce at levels not seen since August 2020. 

As the war in Ukraine intensifies and the cost of commodities continue to spiral, likely causing a sustained period of high inflation, investors have piled into safe-haven assets like gold as one of the few areas of markets likely to hold their value at this time of geopolitical and – potentially soon – economic crisis. 

Having initially had a slightly subdued reaction to Russia’s invasion of Ukraine, gold now has real momentum behind it on the back of a series of price surges and could soon set an all-time high in dollar terms, having already done so in a number of other major currencies.

Silver Price Analysis

Silver has benefited from dual supporting factors from the war in Ukraine that has seen investors rush to haven assets as well as driving up commodity prices, including precious metals.

On the back of this wave of support, silver has broken through resistance at around $25.40 an ounce to climb above $26 an ounce to be trading at levels last seen in August 2021. With the factors behind silver’s current rise not going away any time soon, there is a strong case for further gains for the metal still. 

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Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. 

As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.