Tensions between Russia and Ukraine have spilled over into the global economy today, with markets across the world in the red after Russian troops invaded the Crimea region of Ukraine.
As the conflict intensifies, investors are wondering what further reverberations it might have.
And, because Russia is a major energy exporter to European markets, an armed conflict may jolt the EU, according to Citi economists.
"Should a trade embargo (or worse) occur, the volatility of oil and gas prices, and of energy prices in general, will increase markedly," they write. From the note:
The global oil market continues to be more integrated than the global gas market, which remains regionally segmented because of the limited reach of pipelines and limited gas liquefaction, shipping and de-liquefaction capacity. Finding alternative sources of supply and alternative markets will be harder for gas than for oil, so gas price volatility ought therefore to be greater than oil price volatility. Because a trade embargo would likely reduce the effective supply for oil and gas more than the effective demand in the short run, this increased volatility should be around a significantly higher level of oil, gas and electricity prices.
Sky News' Ed Conway tweeted this chart putting Russian gas exports in perspective. Other than Ukraine of course, Germany and Turkey may get hurt if the conflict continues.
