The Economic Impact of the Russia-Ukraine War

We are all shocked and saddened by events in Ukraine. Vladimir Putin’s horrific invasion of Ukraine has and will continue to have disastrous consequences for the people of Ukraine, and we at MHA Caves Wealth stand in solidarity with all those affected. Although we are talking here about the impact on markets, we acknowledge first and foremost that this is a humanitarian crisis with potentially awful consequences for millions of people.

In response to Russian aggression in Ukraine, the West has united to impose an unprecedented package of economic sanctions on Russia, designed to hamstring the Russian economy as well as the wealthy oligarchs of Putin’s inner circle and beyond. Some of which include banning several major Russian banks from the Swift payments system, freezing the overseas assets of hundreds of oligarchs, banning numerous imports and exports to and from Russia respectively, and, more recently, the US announced it was banning imports of Russian gas and oil. It is hoped that these sanctions will cause Putin to think twice about further aggression, while also turning his inner circle and the general population against their leader.

While these sanctions will hurt the Russians the most, there will of course be impacts on Western economies, some of which can already be felt. Although the UK is far less reliant on Russian gas and oil than the continent, we should still expect a knock-on effect as the UK pays more for its inventories and is affected by global markets.


The uncertainty around whether Europe would ban oil imports from Russia resulted in a surge in price for a barrel of crude, hitting $130 per barrel last week. The price has fallen to around $100, but we can expect further price volatility – and thus prices at the pump – while this war rages on.

The price of crude oil impacts more than just petrol and diesel prices. The price of food, for example, is partly driven by oil prices due to the cost it takes to run the trucks that distribute the food and power the production lines. Part of this increased cost will inevitably be passed onto the consumer. Some experts believe that this could contribute to food prices rising by 10% or even 15%.

Outside of food, there are countless other industries that rely on oil, the price of which must be factored into their margins. Virtually every retail shop relies on deliveries being made, either to their store or to customer’s homes.


Although the UK is much less dependent on Russian gas than EU countries (Germany, for example, currently gets 40% of its gas from Russia), increases to the price of natural gas will still impact the UK as global markets get more expensive. UK household energy costs are already set to increase significantly in April, as the price cap, or the maximum amount an energy provider is allowed to charge for gas, is set to increase by 54%.

The price cap is set in advance, so the current limit does not reflect the ongoing crisis in Ukraine and its effect on natural gas prices. The next price cap after April is in October, and that one will take into account the current economic climate. Therefore, we can expect the cost of energy to rise even more, with some forecasting the annual energy costs for the average household could reach £3,000.

Financial Markets

Geopolitical crises often create concern for investors, and it isn’t usually clear how such crises will affect the global markets. However, with the benefit of hindsight, we know that conflict usually creates short-term volatility but has little impact on the markets in the long-term. While we hope the conflict will resolve soon, it may not do so in the immediate future and thus we should expect further volatility in the weeks to come.

As we know the economic impact of the conflict reaches far wider than the two countries involved, our investment managers are working to ensure client portfolios are sufficiently protected should the conflict continue to intensify.

MHA Caves Wealth

We understand that this is a concerning time and that many will be worrying about how the Russia-Ukraine conflict will impact them. At MHA Caves Wealth, we offer one-to-one support to help you manage your finances and offer guidance on how you can make your finances work better for you. Should you wish to book an appointment, please do not hesitate to give us a call on 01604 621 421 or fill in an online contact form.

As individuals and as a firm, we are supporting the Disasters Emergency Committee. The Disasters Emergency Committee is an umbrella group of UK charities, and its work is sanctioned by the UK Government. Further information can be found here:

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