The Bloomberg Commodity Spot Index is at all-time highs, surpassing even its October peak when natural gas prices surged, contributing to Europe’s energy issues. The latest leg higher, however, is largely a reflection of traders pricing in Russia-Ukraine risk. The most obvious place to see it so far is rising oil and liquefied natural gas. But it’s also happening beyond energy.
Look at wheat and aluminum, for instance. Given that Russia and Ukraine combined make up a quarter of global grain exports, wheat and corn prices have risen on the possibility of a sudden supply crunch. It’s a similar story for aluminum, as Russia is a key producer of the metal. The moves in these key Russian exports have far reaching consequences for U.S. consumer prices. Whereas oil and LNG has been driving global inflation and largely hawkish pivots in monetary policy, wheat and aluminum will likely hit American shoppers particularly hard, spilling over into things like bread and cars.
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