How will Russia’s invasion of Ukraine affect Americans? It starts with your wallet

Already faced with rising costs at gas pumps and grocery stores, Americans are likely to face further cost increases following Russia’s invasion of Ukraine.

Russia’s long-expected attack of its southwest border began on Thursday, Feb. 24, and President Vladimir Putin warned countries that any interference would lead to “consequences you have never seen.”

Regardless of whether the United States engages in war with Russia, the conflict in Eastern Europe is expected to damage the economy overseas.

Here’s how Americans might feel the affects of Russia’s invasion of Ukraine.

Gas prices

Oil prices rose 8% Feb. 24 to reach $100 a barrel, the highest they have been since 2014, according to CNBC.

In turn, the national average gas price rose to $3.54 — up 21 cents in the last month, AAA data shows. The reasoning behind the increase: Russia is one of the top exporters of oil to the United States — only Canada supplies more, NBC News reported.

With the prospect of war looming, there is fear Russia will withhold its oil, so the United States and other countries will look elsewhere, according to AAA. If Russia blocks access to oil, it could lead to a smaller supply, and thus higher demand.

“Russia is incredibly unimportant in the global economy except for oil and gas,” Jason Furman, a Harvard University economist and former adviser to President Barack Obama, told The New York Times. “It’s basically a big gas station.”

Patrick De Haan, head of petroleum analysis at GasBuddy, estimates oil will rise to $120 a barrel, translating to an average of $4 per gallon of gas for Americans, according to The New York Times.

President Joe Biden said this week his office is coordinating with other oil producers to limit the pain at the gas pump.

Stocks

The stock market plunged on Feb. 24, with the Dow dropping 830 points, CBS News reported. By the afternoon, the Dow, Nasdaq and S&P indexes had all dropped by 2% from a day earlier, according to Forbes.

“In the first minutes of trading, 93% of the S&P 500 were down, with 71 stocks having fallen 4% or more,” MarketWatch reported.

Stocks have been falling for weeks and Edward Yardeni, a Wall Street economist, fears the market will continue to weaken.

“A 10 percent decline isn’t that bad in itself, necessarily, but if the market keeps heading down, the next thing you know, you’re down 20 percent and then by common agreement you’re in a bear market and, maybe, worrying about a recession,” Yardeni told The New York Times.

The Russia-Ukraine situation is the latest in a wave of conflicts investors have faced.

“If they’re not worried about Russia-Ukraine tensions, they’re worried about inflation and the Fed. Or Russia. Or oil. Or tech,” Callie Cox, U.S. investment analyst at eToro, told MarketWatch. “The stock and crypto rallies have stalled for now, and they may be stuck until we get some clarity on these issues.”

Food and other items

The United States does not receive much food from Russia or Ukraine, but Americans could still see higher prices at grocery stores, Phil Lempert, a food marketing and consumer behavior analyst, told NBC News.

“If a war does break out and other countries stop importing from them and shift to importing from the U.S., prices will go up (as following demand) and we could see some shortages,” Lempert said.

Ukraine is a major producer of wheat, barley, rye and corn, CNBC reported. Russia is the world’s largest exporter of wheat, the news outlet said.

Ukraine suspended commercial shipping on Feb. 24, meaning the supply chain of some of its top exports could weaken, Reuters said.

“Rising food prices would only be exacerbated with additional price shocks, especially if core agricultural areas in Ukraine are seized by Russian loyalists,” Per Hong, senior partner at consulting firm Kearney, told CNBC.

This story was originally published February 24, 2022 at 11:42 AM with the headline "How will Russia’s invasion of Ukraine affect Americans? It starts with your wallet."