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Commodities swell as war raises concerns over supply crunch

(Bloomberg) – Commodities extended their huge rally as Russia’s invasion of Ukraine continues to stir up global markets and heightened fears of a supply crisis.

Prices from raw materials to aluminum and wheat soared as crude staged its most surprising weekly surge since 1974 during the days of the oil crisis.

Russia’s growing isolation is shutting down a major source of energy, metals and crops, raising fears of prolonged shortages and accelerating global inflation. Merchants, banks and shipowners are avoiding doing business with Russia because of difficulties in securing payments, while shipping lines shy away from bookings from the region.

Tensions escalated early Friday after Russia attacked a Ukrainian nuclear plant, which Ukrainian officials say is Europe’s largest nuclear plant. As Russian forces occupied the area, Ukraine’s nuclear regulator said its final test showed normal radiation levels before stopping surveillance.

West Texas Intermediate oil jumped 5.7% on Friday before traders assessed the severity of the nuclear plant attack. Prices are still up about 22% this week as many global buyers avoid Russian crude oil and fuel, sparking a race for alternative supplies.

The International Energy Agency warned that global energy security is at risk, and the planned release of emergency oil reserves by the US and other major economies has failed to address supply concerns. JPMorgan Chase & Co said global benchmark Brent crude could end at $185 a barrel if Russian supplies continue to be disrupted. Prices were around $114 on Friday.

Wheat rose to its highest level since 2008, deepening fears of a global shortage as the Ukraine war cut nearly a quarter of the world’s exports of the staple used in everything from bread to cookies and noodles. Wheat grinding in Paris reached an unprecedented 400 euros ($438) a tonne.

Read: Russian Invasion Supplies the World’s Breadbasket

Base metals also rose after the LMEX metal index, which tracks six major contracts, hit record highs on Thursday. Rising energy prices have added to the momentum by driving up costs. Aluminum, one of the most energy-thirsty metals, rose 4% to $3,867 a tonne on the London Metal Exchange, a fresh record, while nickel, another major battery metal, jumped sharply to $30,000 a tonne in London. Upstairs business. For the first time since 2008.

Copper also closed at all-time high. Stocks in warehouses tracked by LME have fallen to their lowest level since 2005.

The impact of the war and US and European sanctions on Russia has increased Black Sea supplies at a time when global reserves of raw materials are already tight. Russia is a major supplier of crude oil, natural gas, grain, fertilizers and metals such as aluminum, copper and nickel.

Higher commodity prices have the potential to suppress growth and fuel inflation, posing a dilemma for central bankers worldwide as they weigh the need to raise borrowing costs against the risk of blocking economic recovery. We do.

Among other commodities, benchmark European gas climbed 33% to a new record and is set to double this week.

– With assistance from Serene Cheong, Winnie Zhu, Martin Richie, Ann Koh, Ranjeeta Pakiam, Jake Lloyd-Smith and Yvonne Yu Lee.

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