What Ukraine crisis means for energy and commodity markets

Current oil and gas pricing may seem chaotic. But there is logic to recent energy market moves, as well as useful precedents for investors to learn from.

Markets are being driven by the confluence of two epochal developments, both of which have occurred before: an energy shock as major sources of commodity supply are taken out by geopolitical factors; and an energy transition. The primary case study for the first is the 1973-1974 Arab oil embargo. One lesson from that time is that natural resources markets have always been more vulnerable to supply shocks than investors tend to remember. Another is that sharp and sustained rises in inflation, leading to dramatic shifts in monetary policy and stagflation, emerge as the central scenarios fr...