New Delhi (TIP)- Tensions over Ukraine are entering a critical period, driving up prices of raw materials key to the global economy, and piling pressure on governments already struggling with surging inflation.

The U.S. has warned that Russia could attack its neighbor as early as this week, even though Moscow has repeatedly denied it plans to invade. Markets have been on edge for weeks, and an actual conflict — or sanctions on Russia — could drive energy and food prices even higher, and push Europe into a major supply crisis.

Crude oil is approaching $100 a barrel and gas in Europe surged. Aluminum is heading toward a record high and palladium has risen this year, while wheat continues to gain. The crisis “could spawn a butterfly effect, sending commodity prices spiraling higher as supply woes multiply,” analysts at Bloomberg Intelligence said in a recent report. “Sanctions could usher in shortages of food and energy, causing prices of both to soar.”

Where Military Forces Are Assembling Around Russia and Ukraine

With traders and policymakers scrutinizing every move and comment in the standoff, here’s a look at the potential consequences for key raw materials.

One of the biggest impacts so far has been on Europe’s gas markets. Geopolitical tensions have been amplified by already limited supplies from Russia and below-average stockpiles, with prices in the region jumping nearly fivefold in the past year.

A full-blown conflict could disrupt the massive volumes that Russia sends to Europe, about a third of which comes through Ukraine. Sanctions could hit trade and keep a new pipeline, Nord Stream 2, from bringing Russian gas to Europe. That could all have a big impact on refilling inventories in the summer, making next winter difficult as well. Prices could surge even higher, and send Europe’s economy reeling. Russia would also lose huge amounts of revenue.

Still, many think it’s unlikely gas supplies would stop, or even be cut significantly.

A major casualty could be even higher food prices. Ukraine and Russia together are heavyweights in global wheat, corn and sunflower oil trade, leaving buyers from Asia to Africa and the Middle East vulnerable to more expensive bread and meat if supplies are disrupted. That would add to food-commodity costs that are already the highest in a decade.           Source: Bloomberg