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What Ukraine invasion means for consumer prices in the UK

Ukraine invasion: Russia and Ukraine supply a quarter of the world’s wheat, and half of its sunflower products, such as seeds and oil, while higher gas prices have a knock-on effect on food through fertiliser and transport costs.
Russia and Ukraine provide many of the agricultural products we consume in the UK, while higher gas prices have a knock-on effect on food through fertiliser and transport costs. Photo: Tolga Akmen/AFP via Getty Images

Russian president Vladimir Putin has launched an invasion of Ukraine, shrugging off the barrage of sanctions that preceded Thursday’s military escalation.

There have been reports of missile strikes on various targets around Ukrainian cities including Kyiv, Kharkiv and Dnipro, and heavy fighting as Russian troops unleashed an attack on the country.

Putin announced a "special military operation" despite warnings from world leaders that it could spark the biggest conflict in Europe since the Second World War.

There has been major condemnation of Russia’s actions by the West, with further sanctions set to be announced.

However, what does a full-scale war mean for consumers in the UK, and what are the knock-on effects for our daily lives?

Oil and gas

Russia is the world’s largest natural gas exporter, while Ukraine is a key supplier of gas, crops and steel to Europe.

Large amounts of gas are piped from Russia through Ukraine to the European Union, meaning that disruptions pose risks of shortages and will add to inflationary pressures.

UK natural gas futures rose almost 30% while benchmark European gas prices soared as much as 41% to €125 a megawatt-hour in their fourth consecutive day of gains. Europe depends on Russia for more than a third of its gas.

Meanwhile, Brent crude oil has already surged past $102 (£76) a barrel on the back of the news, hitting its highest level for more than seven years.

Although the UK only gets around 6% of its crude oil and 5% of its gas from Russia, the invasion will still add consequences to the cost of living and inflation in Europe as Russia is among the world’s biggest suppliers of oil.

Read more: Oil soars above $100 after Putin declares war on Ukraine

Analysts have pointed to wholesale gas prices climbing as high as 1,000p per therm in Britain if Russian supplies to Europe were to be completely cut off.

“The surge in the oil price is terrible news for businesses and consumers, and fundamentally this clarifies one of the key impacts of the Russia/Ukraine war – it will serve to further stoke inflation,” Russ Mould, investment director at AJ Bell, said.

Experts believe deeper military conflict will likely exacerbate the existing imbalance between demand and supply, with the potential for oil prices to journey towards $110, and possibly even $120 a barrel.

Oil and gas prices are likely to stay highly elevated with hard hitting sanctions set to be imposed by the international community.

Watch: EU promises 'harshest package of sanctions ever' against Russia as NATO increases readiness of forces


Both petrol and diesel reached new record levels on Wednesday, with unleaded coming in at nearly 149.5p a litre, and diesel almost 153p. This compares to petrol at 145.91p a litre and diesel at 149.22p a month ago, and petrol at 122.50p a litre and diesel at 125.99p a year ago.

Both the AA and the RAC warned that UK petrol prices were set to rise further on the back of the conflict.

“Russia’s actions will now push petrol pump prices up to £1.50 very soon. The question then becomes where will this stop and how much can drivers take just as many are using their cars more and returning to workplaces,” RAC fuel spokesman Simon Williams said.

He added that if the price of oil was to increase to $110, there would be a real danger the average price of petrol would hit £1.55 a litre. This would cause financial difficulties for many Brits who depend on their cars for getting to work and otherwise.

Read more: The Russian banks and billionaires targeted by UK sanctions

“Oil at $110 would sky rocket the cost of a full tank to £85. At $120 a barrel – without any change to the exchange rate which is currently at $1.35 – we would be looking at £1.60 a litre and £88 for a full tank.”

Edmund King, president of the AA, echoed this, saying that “new record fuel prices are likely anytime soon”.

According to new data, the fuel poverty gap for England will be £779m this year, up 10.5% in two years. The gap has risen to £258 per person – up 15% in two years.

“Millions of people have fallen into the fuel poverty gap, and war between Ukraine and Russia could push even more of us over the edge," Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.

"And this is even before the full impact of April’s price hike has fed through into the calculations – let alone the risk of war pushing prices up significantly again in October."


Russia and Ukraine together supply a quarter of the world's wheat.
Russia and Ukraine together supply a quarter of the world's wheat. Reuters/Marcelo del Pozo

Not only will energy bills keep going up, but food prices look set to jump even higher too. Ukraine and Russia are both big agricultural producers, with the former often dubbed the breadbasket of Europe.

Russia and Ukraine supply a quarter of the world’s wheat, and half of its sunflower products, such as seeds and oil, while higher gas prices have a knock-on effect on food through fertiliser and transport costs.

Analysts at Rabobank have warned that a full-scale war could impact half of Ukraine’s grains production and double global wheat prices. European wheat futures jumped 20% to a record price of €344 a tonne on Thursday, the biggest rise in nine years.

Watch: What Are Markets Telling Us About Russia's Invasion of Ukraine?

“It’s a very important staple food around the world, so even a relatively small disruption in supplies can have a large effect on prices,” said Patrick Westhoff, director of the food and agricultural policy research institute at the University of Missouri.

Any disruption to supplies could also force buyers to seek alternative sources, which could hike up prices.


The cost of everything from grains to metals has jumped on concerns that raw material flows will be disrupted by the unfolding crisis.

Ukraine is a major grain exporter, while Russia is a major producer of metals such as palladium, aluminium and nickel. Russia produces 6% of the world’s aluminium, and 7% of its mined nickel.

Read more: Gold price hits one-year high as investors flock to safe haven

Three-month aluminium prices (ALI=F) on the London Metal Exchange rose to a record high of $3,443 a tonne, and later traded 4.2% higher at $3,428.5, amid investor concerns over supplies from Russia, and an impact on production from higher energy prices.

Nickel climbed 3.4% to $25,220 a tonne, after hitting its highest level since May 2011 to $25,240.

Soni Kumari, an analyst at Melbourne-based ANZ bank, told Reuters: “Aluminium and nickel are energy intensive metals and higher energy prices would further push the cost curve. This raises the risk of more European smelters suspending their production or postponing their restart plans.”

Palladium has also risen as much as 8% to its highest since August on concerns over potential supply disruptions. Russia produces about 40pc of the palladium mined globally.

Ukraine’s steel makes up about a tenth of Europe’s imports, so any disruption to mills or shipments would also tighten the continent’s already strained market and help keep prices high after they reached a record last year.

Read more: European stock markets sink as Russia invades Ukraine

The pound

Investors have been selling risky asset classes such as stocks and cryptocurrencies, and switching to gold, the US dollar, the Japanese Yen and the Swiss franc, which are seen as safer investments at times of uncertainty.

Sterling has slumped against the dollar (GBPUSD=X) in recent weeks, feeling the impact of Russia’s invasion into Ukraine through both the deterioration in broad market risk sentiment and the inflation channel as commodity prices soar.

“The higher gas prices and uncertainty around the gas outlook add risks to the pound’s outlook, but unlike the eurozone, higher gas prices in the UK may lift short-term interest rate expectations, offering the pound a level of support – especially in the GBPEUR cross,” Simon Harvey, head of FX analysis at Monex Europe, said.

The pound has been falling against the US dollar amid the Russia-Ukraine conflict. Chart: Yahoo Finance
The pound has been falling against the US dollar amid the Russia-Ukraine conflict. Chart: Yahoo Finance

“Against the US dollar, the pound will be more vulnerable to the risk profile given the dollar’s safe-haven appeal. On Thursday, the Bank of England kick-off their first-ever annual conference, however, this won’t be closely watched by market participants given recent events.”


A Ryanair aircraft lands on the southern runway at Gatwick Airport in Crawley, Britain, August 25, 2021.  REUTERS/Peter Nicholls
Ryanair has already halted flights to and from the Ukraine. Reuters/Peter Nicholls

Travel bookings and airlines have also been affected by the invasion as a number of airlines have already issued statements on the current conflict.

Budget carriers Ryanair (RYAAY) and Wizz Air (WIZZ.L) have both halted flights to and from Ukraine after Russia invaded.

Ryanair said: “Due to the closure of Ukrainian airspace overnight, and the apparent invasion by Russian forces all Ryanair flights to/from Ukraine have been suspended for at least the next 14 days.

“All affected passengers will receive email notices later this morning and all flights to/from Ukraine have been removed from sale for at least next four weeks until further information becomes available from EU safety agencies.”

Wizz Air said: “Due to the current events in Ukraine and the airspace closure, Wizz Air regrets to inform our customers that the airline must temporarily suspend all flight operations in the country.”

Earlier on Thursday, Transport Secretary Grant Shapps instructed the UK Civil Aviation Authority to ensure airlines avoid Ukraine's airspace to keep passengers and crew safe.

Watch: Why are gas prices rising?