US and European futures continue to trade with massive volatility. It has pretty much become a norm for markets to make a few U-turns in a day as the ongoing war situation in Ukraine is keeping traders on edge. Oil prices don’t seem to be easing from their recent high level; however, important factors such as Iranian oil coming back on the market sooner than later are under focus. The precious metal is back in demand as traders prefer to place their money in less risky assets, and the Russia and Ukraine war is also having an influence on the central bank’s monetary policy decisions around the globe. Bitcoin is holding on to its gains, and trading continues to hit a new peak against the Russian Ruble, but traders are most worried about one thing.
Russian Army increased its attack on Ukraine over the last 24 hours as towns and cities in the east of Ukraine are now under fire. This is a further moment of uncertainty for traders and investors as everyone is looking at one city, Kyiv. When Russia begins its full force attack on Kyiv, it will be clear that it wants to take over the country. Joe Biden, the US President, has also increased the geopolitical tensions by another notch by labelling President Putin by saying that Putin’s move was “badly miscalculated .” There is no doubt that war is no good for Russia, and sanctions imposed on Russia are likely to adversely influence the global economy. Many believe that cutting Russian banks from the SWIFT banking system will only weaken the Russian economy; however, the fear among traders is that the move could backfire.
Oil prices are skyrocketing as Russia, and Ukraine’s situation continues to become worse. Yesterday, we saw the Crude oil touching its seven-year high, and bulls are in no mood to abandon the ship yet. Looking at the price action, it is very clear that there is serious fear among traders who believe that sanctions are likely to be announced on the Russian energy sector, especially on Russian oil. It is important to emphasize that Russia is an extremely important player as an oil producer, and it plays a vital role in maintaining the oil supply. No matter how big the coordinated action among the US and its allies will be in terms of releasing oil reserves on the market, putting sanctions on Russian oil is going to make matters a lot worse.
Speaking of essential factors, the OPEC meeting is the only significant event that traders will be looking very closely. So far, some OPEC delegates have made it clear that the ongoing Russia and Ukraine situation has no bearing on their current decision. This means Russia continues to remain part of the OPEC+ cartel. It is incredibly difficult to throw Russia out of the OPEC+ cartel, let alone sanction Russian oil. Moreover, if there are any sort of restrictions on Russian oil, Russia will likely offer a deep discount on its oil, and we may see large transactions in the Chinese Yuan. One possible way to fill in the gap in terms of oil supply would be to bring Iran back on the market and allow it to pump as much oil as it can to fill the void. However, looking at the current landscape, it seems difficult to see such a scenario, but hopes are high that we may hear anything meaningful this week. If we do hear from the US that it will lift oil-related sanctions on Iran, we may see oil prices coming off their high. But it is also imperative to keep in mind that allowing Iran to pump oil would mean that there will be restrictions on Russian oil, which may keep the oil prices anchored in place.
Gold is back in demand, and this time the move in the gold price is substantial. For the past three days, we have seen positive price action for the metal as uncertainty continues to grow due to the heightened geopolitical tensions. Yesterday, we saw a typical trade under which traders moved their money from riskier assets to risk-off assets such as gold. Despite all the criticism about gold in recent years, which gave much popularity to Bitcoin, in times like this, gold is still the ultimate risk-off asset. It is now very much clear to traders that in times of war, gold is the ultimate safe-haven asset. Shifting focus away from war, one factor that is still very dominant on the gold price is the Fed monetary policy decision. Given the war situation in Ukraine, traders have now started to scale back on their bullish bets on the dollar index in terms of rate hikes. It is widely believed that Fed will not take as aggressive a stance towards their monetary policy as they previously anticipated.
The digital asset king, bitcoin, continues to maintain its gains, and the price is firmly holding on to its support of 40K. Trading Russian Ruble and BTC made a new high, and traders believe that people in Russia and Ukraine are actually behind the current rally in Bitcoin But one important factor to note when it comes to the bitcoin price is that if the US begins to see that Russians are using Bitcoin as a mean to avoid sanctions, it is highly likely that the US may push for a coordinated action to ban bitcoin. Banning bitcoin under that scenario will bring much higher volatility in the BTC price. It may actually rock the whole financial market because we have many companies with massive balance sheet exposure in Bitcoin. But it is certainly one thing that traders need to watch out for.