It’s been a jittery day on the markets due to escalating tensions between Russia and Ukraine. With Russian troops entering eastern Europe, it caused oil prices to jump while riskier assets such as Bitcoin saw their values plummet.
It was the soaring prices of oil that indicate just how serious things are getting as Russian President Vladimir Putin ordered his troops into the breakaway Ukraine regions of Donetsk and Luhansk. Tuesday saw the price of US crude rise as much as 3.7% on the markets in Asia. This was followed by the value of Brent hitting 2.5%.
The fact that West Texas Intermediate crude futures are now trading above $90 per barrel is all the more remarkable considering that its price was below $50 per barrel as recently as March 2021. This year has seen oil prices soaring with the cost of crude rising by as much as 20% in 2022 alone.
The oil price rises aren’t just down to the conflict between Russia and Ukraine. While Russia is the largest gas and oil supplier in Europe, there has been a tight supply across the whole industry. As such, analysts are predicting that the cost of oil could hit $110 per barrel before long. This would only happen were Russian oil supplies to be cut off to Europe. But with Putin appearing determined to invade Ukraine, this dramatic oil price rise could become a reality.
As such, there are frantic talks underway to remedy the escalating situation between Russia and Ukraine. Plus hopes are that Iran’s nuclear agreement could be revived which could release a further one million barrels of crude oil onto the market, which when added to a further four million to be released by Saudi Arabia, the UAE and Kuwait, would go some way to addressing the supply problem.
Tough times for cryptocurrencies
While the demand for oil is seeing the price of crude soar, cryptocurrencies are once again in the doldrums. Bitcoin was one of the hardest-hit cryptos following the news that Russian troops had entered Ukraine. This triggered a fall in Bitcoin value to hit a low of $36,370 which was the crypto’s worst market performance in weeks.
There were also falls of 4% for Ethereum while Ripple had a very turbulent day and lost 10% of its market value. All of this is due to the theory that investors are much less likely to invest in riskier assets such as cryptocurrencies during a time of market uncertainty.
With the potential of a full invasion of Ukraine just around the corner, the appetite for cryptocurrencies appears to have fallen. Such a trend is notable as it debunks the theory that Bitcoin was somehow equivalent to the likes of gold in being a safe store of value. However, with the cryptocurrency now regularly trading for way less than its November high of $68,000, it seems that Bitcoin can be filed alongside some of the more speculative stocks.