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War: a disaster or an opportunity - Part III

In the last part of this series, I wrote about new potential supply chains, as both the west and Russia are starting to move away from each other. In Part 3, which will be the final part of the series, I will outline the way that markets and companies have been affected by the war in the Ukraine, how governments may or may not support them and how stock/commodity markets may move in the future.

Why are stock markets so calm right now?

One thing that you’ll notice is that the Dow Jones hasn’t crashed because of the Ukraine war. Rather, it’s stagnated, like it has been for some time now. But why is that? The truth is, the crisis has targeted Russian markets more than western ones. This is because of the sanctions that have been imposed on Russian financial services from western countries. It’s also because of the promise of European countries to become independent of all Russian resources. But wouldn’t that impact western firms as well? As it turns out, it already has. For example, many German firms reported smaller gains and even losses because of the Ukraine war. Even though these firms worry for their financial future, many support the sanctions, but demand help from the government as compensation. The thing is, this would technically be another stimulus package amid already record high inflation. Now governments are asking the question: Can we help the firms without fuelling inflation? Actually, many are doing the opposite thing, with the Fed announcing that it is willing to set rates even higher. Even though the US economy isn’t as directly affected by the Ukraine war, the European Central Bank might follow suit.

And what about the American markets? Is it foolish to assume that because the geographical position of the USA is so far away from Russia and its resources, there is no effect in America? Well, it might be, since many companies may actually turn a profit from the war. This is also the reason why markets have been stagnating and not crashing. Even though Russian markets have been crumbling (and have actually been closed since the start of the war) and European companies have been suffering losses, the markets have not been crashing. How can this be? Well, since the EU and the UK don’t have enough natural resources, the US has pledged to help them by selling them liquid gas. This is, for example, great news for some American gas firms. Should American firms also be inclined to sell wheat to their European allies, they will definitely use the opportunity to profit from a newly available market. Of course, the same would go for Argentinian wheat firms, middle eastern Oil and gas firms and metal firms that want to close deals with Europe.

Russia only accounts for a fraction of the global markets and while this fraction is large, Europe can get resources from overseas as well. While Europe’s firms are losing money, American, middle eastern and South American firms are making profits. This is, in essence why the market has stayed surprisingly calm.

What industries profit from the war?

Due to the new developments in the financial and commodity markets, some industries tend to do a lot better than others. This includes industries that help European countries to hold on to the same standard of living that the people there have always experienced and defend against the newly perceived eastern threat.

Arms industry

The arms industry includes land weapons for a ground assault, Aerospace systems and Naval weapons like military submarines and naval missiles. There has been a growing European and especially eastern European desire to increase military funding due to the war. This is because many fear that Russia might target another European country or might generally start a war with the west, in which case Europe ought to be ready. Germany has funded its arms industry with €100 billion, with Olaf Scholz citing the neglect of the German military in recent years.

“From now on, we will invest 2% of our GDP into our defence, every year” - Olaf Scholz, Chancellor of Germany

Other countries in the EU have followed suit by making similar pledges to fund their military. The Swedish prime minister has announced increased military spending and Romania has pushed its military spending from 2% to 2.5% of its GDP. Latvia, much like Romania, planned to increase its military budget to 2.5% while the Netherlands had already made a significant military budget hike in 2021. Eastern European countries like Latvia are understandably more concerned than the rest of Europe, as they would be the very first target in a Russian-European war.

With this increased demand in arms, the question is: Who will supply whom? The largest military supply, globally, is the United States of America, with the largest importer being Saudi Arabia. This is because Saudi Arabia is currently involved in the ongoing Yemeni civil war and, thus, needs a lot of arms. Next up, as the largest global exporter, is Russia with China being the fifth largest importer. This would again demonstrate a market in which Russia could be of use to China.

The five largest arms manufacturers are Lockheed Martin (up 12% since the war), Boeing (down 13%), Northrop Grumman (up 13%), Raytheon Technologies (up 2%) and General Dynamics (up 6%)– all of which are American companies followed by Chinese, British, Russian and French manufacturers. The German arms manufacturer Rheinmetall has already reported an increase in sales. Their stock price has responded accordingly, with stocks being up nearly 80% since the beginning of the war. They have also reported an increase in production with new facilities being opened in eastern European countries, in order to prepare for the obvious rise in demand by European countries. As for Russian arms: With Russia being the second largest arms exporter globally, could European independence from Russian markets prove destructive for the Russian Federation? Most likely not, as the two largest importers of Russian arms are India and China, who already show signs of future cooperation with the Russians, followed by many eastern and Muslim countries. Russia will most likely increase trade with its two biggest partners and its business should see some profit.

As for the profitability of western arms corporations, a lot of countries have just begun to make defence deals with arms corporations. There is still a lot of room for expansion, for deals to be realised, for production and, thus, sales to increase and for the market to perceive these companies as more valuable. The biggest arms manufacturers of America have availability to American resources and already are the most powerful firms. They will, therefore, have the biggest advantage, while European firms will have access to a stimulus package specifically designed for them. This will result in them having a lot of room to grow and smaller European firms may also profit from sudden increased arms funding.

Oil and Gas Industry

Oil and Gas, which are used for industrial purposes, energy and heating, are the most discussed sectors in the wake of the war, as Russia supplies Europe with copious amounts of both. With Europe moving away from Russian markets, little supply and high demand (also due to the coronavirus pandemic and ongoing inflation) have caused prices to increase rapidly. In the first article of this series, I already outlined the largest oil/gas supplying and importing countries. The largest oil producing firms are Saudi Aramco (up 5% since the start of the war), PetroChina (up 6%), China Petroleum & Chemical Corp. (up 2%), Exxon Mobil (up 11%) and TotalEngines SE (up 34%). Whilst many in Europe want to move away from Russian gas, many oil firms in the west have been accused of using the war as a pretext to sell oil and gas at higher prices. Oil/gas firms such as Shell have come under fire for still buying Russian oil despite the plea of the people of Ukraine to stop. Since Europe’s energy firms import a great deal of oil and gas from Russia, the war and the resulting sanctions will take its toll on them. It follows that they will lose money unless they import it from elsewhere at a higher price. As such, the profitability of these firms has gone down. In the rare event that the sanctions are actually lifted or that cooperation with Russia is actually possible, European firms may just get a big portion of their profits back. Since this scenario is extremely unlikely though, they will have to cooperate with either each other or a foreign third party.

The Energy Select Sector SPDR, an energy index, is up nearly 13% since the start of the war, as the world is willing to pay for higher prices to get oil. This includes oil for shipping goods and energy. Comparatively, the S&P 500 gained 3.5% since the start of the war. If you include the time before the war, which was filled with tension surrounding the fate of Ukraine and whether Russia would actually invade Ukraine, you would get vastly different results: The Energy Index gained nearly 40% in 2022, whilst the S&P 500 lost about 7%. Looking at the data, the entire energy, shipping and industrial sectors, as those are most affected by the sanctions and resulting shortages, look like they are doing well in terms of stock prices and sales. The European oil stock index STOXX 600 Oil & Gas gained about 18% in 2022 – about half of what the global energy sector gained. This makes it clear that European oil and gas stocks still do profit from the war, but still far less than American and other foreign firms. With access to ample amounts of oil, it is only natural that US firms will do better as the west separates from Russia.


The commodity market has been severely affected by the war as well. Of course, commodities such as gold usually perform differently than other metals, but since Russia supplies such large amounts of metals to Europe, it makes sense that the markets are affected by the war. In the end though, many commodity markets are going up now.

Gold is often considered a safe haven in times of uncertainty. This is because gold is a tangible asset and has historic value as the most valuable asset one can own. Hence, it is looked upon by investors as a sort of guarantee. Whilst some investors consider the value of gold as a currency a relic of the past, many others beg to differ. Once the war started and the continued trade of Russian gold to Europe became an uncertainty, combined with other developments such as sanctions surrounding the Ukraine war, the price of gold rallied. At the time of writing, it is at about $1980 per ounce. Once it does reach the $2000 mark (it already has but it could again) and even goes beyond that, we have proof of serious inflation, as when the value of gold appreciates abnormally, it is considered a viable indicator of inflation. With every increase in general market risk, the price of gold will rise. The origins of increased market risk can be inflation, developments regarding the war and unfavourable developments regarding western markets.

Other commodities are also affected by the shortage of goods from Russia. Steel and other metal markets have also rallied. All in all, the S&P GSCI, an index to measure the performance of commodities, has risen about 17% since the start of the war. Steel has risen about 24%, with the NYSE Arca steel index being used as a measurement.

As for the profitability of commodity companies, whilst companies outside of Europe can benefit from higher prices and new trade routes, European companies will have to import steel from elsewhere at higher prices. This means that foreign commodity firms such as US and middle eastern commodity companies will benefit the most from new developments that separate Europe from Russia even further.

Commodity currencies have rallied in the wake of higher commodity prices (A commodity currency is a currency which moves with the global prices of commodities). The Canadian, Australian and New Zealand Dollar are the most used of these currencies. The Canadian dollar relies on the price of oil, the Australian dollar on the price of iron and the New Zealand dollar on the price of Agricultural commodities.

Wheat and grain market

Because of the lack of Russian and Ukrainian wheat for the Middle east, North Africa and Europe, the price of wheat, grains, edible oils and flour has surged in the regions mentioned above. Little supply and high demand for wheat and other grains, again, results in higher prices. However, unlike other commodities and natural resources like gold, oil and gas, wheat can be planted and harvested locally in Europe. This is why Europe is able to manage the wheat crisis easier in the long term than they are able to with other resources. If Europe becomes self-sufficient, prices will rise, but not to the same extent as they will in other industries.

The real loser in the Ukraine war

With prices rising in all sectors where Russia supplies Europe, the question is, who is the real loser? First and foremost, European and Arab consumers. Following this, the global consumer. This is because the average consumer is ultimately the one who is most affected by rising prices. European resource firms will also suffer losses. While other firms across the globe can manage new supply chains, European firms only have large ties to Russia. However, sanctions prevent Russia from trading with Europe in the future. Even though they are able to sell resources at higher prices, they have to get resources in the first place. It can be concluded from this that US and middle eastern firms will generate greater profits as a result of the war.


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