It is often seen that the relations of any neighbouring countries are not ‘happy and happy' especially when they are part of the same country at some point in time – be it India-pakistan or Russia-Ukraine. For the past few days, there has been a lot of tension between Russia and Ukraine too – Russia is carrying its troops across the Ukrainian border and is demanding that NATO Ukraine not be taken. The last time Russia increased its troops was in 2014 when it annexed Crimea, and relations between the two countries have worsened since then. There are a lot of conflicts going on since 2018 which have become more serious lately.
Due to this conflict, global markets are also affected, why, this conflict is starting a war. And you know that once the ‘war' starts, then how the market ‘supply and demand' start fighting. And then here, Russia, commodity and natural resources is a very important player.
So will the global and Indian markets fall from this conflict now? Will the market crash now? Come, let's see how the Russia-Ukraine conflict will affect the global and Indian markets.
Russia Controls World's Energy Supply
Russia is a natural resource producer and also an exporter. In fact, Russia is the second-largest producer of natural gas and the third-largest producer of oil. This is the reason why Russia is often referred to as ‘Energy Superpower' and ‘Energy Giant'.
Europe's energy demand is largely met by Russia through a network of pipelines through Ukraine. Interestingly, Russia is also planning to build new pipelines to meet Europe's energy demand. And now, Russia has also made a deal with China, with which Russia will also supply its gas to China.
Overall, Russia supplies a third of Europe's natural gas consumption, which meets Europe's demand for its winter heating, electricity generation, and industrial production. Apart from this, the EU is also dependent on Russia for crude oil.
Germany, the largest economy in Europe, is completely dependent on Russia for its supply of natural gas and crude oil. France is also dependent on Russian imports for fossil fuels. According to analysts, Germany and other countries which are planning for nuclear and coal power will become more dependent on Russia going forward.
And if there is a ‘war' then the commodity market will also be affected
Russia is a major supplier of natural resources such as oil, natural gas, fossil fuels, so it is clear that if Russia goes to war, many things will be affected such as currency, commodity, equity, and bond markets.
And if sanctions are imposed, analysts will have a much deeper impact on metals and mining as well – particularly aluminum, zinc, base metals, and steel. Apart from this, agricultural commodities, corn, and wheat will also be affected. If there is a sanction or war, India will certainly skyrocket the price of edible oil – be it sunflower oil or soybean oil.
Now, if war breaks out, let us see What should be your strategy for long term investment as an Indian investor?
Well, due to conflict and tension, all the markets can stay – keep going up and down and, maybe, the markets will remain very volatile. The wisdom is to take a dip in bluechip stocks when the market is in a downturn, especially if you are looking to make a long-term investment.
Also, it is advisable to keep your monthly investments current – this is the right time to accumulate. Do not liquidate. The market may drop significantly and your portfolio may be quite upset – but let us keep in mind that long-term this portfolio will give you a pretty decent return – it's not rocket science. That's why whatever happens, keep your patience. In fact, in such a situation, the best thing about money is that you don't do anything – let everything go as it is.
But if this war goes on continuously, it is obvious that there will be disruptions in the market, and it will also hurt the overall development of the economy. After all, war brings destruction – the worst enemy of a progressive economy. As Russia seems to be in full war mode only hope is that usa and EU will not how to handle it diplomatically. And until they do, all we would ask you as an investor is not to go into ‘panic mode' and use the mantra of ‘keep calm and all is well'.