Investor: US Markets Not Affected by Ukraine Crisis, Inflation Unrelated to Tensions

WASHINGTON (Sputnik) - Tensions around Ukraine are having a mild, if negligible, effect on markets in the US given the distance of Eastern Europe from the American economy, with market dynamics, such as oil prices and inflation, likely developing independently of the situation there, Navigator Principal Investors Director Kyle Shostak told Sputnik.

"Oil prices have briefly touched an almost $100 mark. Investors seem to retreat to the safe haven of the US dollar, treasuries being the preferred choice. All of that seems to add pressure to the inflationary forces and supply chain problems", Shostak said. “However, I think the market is overall under-reacting to the crisis and already began to show signs of tiredness with the whole situation".

The investor stressed that Ukraine is too far and remote from the US economy to justify so much nervous reaction to it.

Shostak believes that the topic of Ukraine is a distraction that has gone out of proportion. He explained that the US economy, after all, is barely connected to Ukraine via regular market forces such as mutual trade and investment.

"The lack of connection and the perceived threat of an 'imminent' invasion should not be deserving so much substantive discussion, time and effort that so many analysts and commentators have been dedicating to", he said. "The Americans have much more important and real economic threats at home that they have to tackle, all of which have nothing to do with Ukraine or Russia, altogether".

The day's closing numbers are displayed after the closing bell of the Dow Industrial Average at the New York Stock Exchange on March 8, 2018 in New York.

© AFP 2023 / BRYAN R. SMITH

On Tuesday, a new analysis by RSM shared with CNN indicates that If the Ukraine crisis caused the oil price to reach about $110 a barrel, inflation in the United States would exceed 10% on a year-over-year basis.

"I disagree. The oil can go so much higher than $100 only in the case real military action will unfold and continue", Shostak said. “Otherwise the Russian-Ukrainian crisis in the current state cannot be blamed for such a spike. More so, the US inflation in the excess of 10% per annum will never be caused by this crisis. I don't see a connection here".

Shostak pointed out, however, that in some markets, particularly, grain, the impact is much more direct.

"The wheat prices have gone up considerably in the last few days as both countries are the world's leading wheat exporters and so any military conflict between them will effectively paralyse the shipments of wheat from the Black Sea ports", the investor explained.

LNG tanker Gaselys

CC BY-SA 2.0 / kees torn / LNG tanker Gaselys

The liquid natural gas (LNG) market, Shostak said, is another example where the exports would be very strongly affected in the event of military hostilities.

"Europe will most likely stop the Nord Stream pipeline project and so the LNG prices will soar. In a sense, Russia being the leading supplier of gas to Europe, will have an economic weapon of its own", he said.

In the past few months, the West and Kiev have accused Russia of a troop build-up near the Ukrainian border in alleged preparation for an invasion. Moscow has denied the accusations, repeatedly stating that it is not threatening other countries and at the same time expressing strong concerns over NATO's military activity near the Russian borders, which it deems a threat to its national security. Moscow has also reiterated that Russia has the right to move troops within its national territory.