By Matt Egan, CNN Business

The Russian-Ukrainian crisis is unfolding thousands of miles from the nearest major US city. And yet, millions of American families would feel the economic consequences of full-scale conflict.

This is because the global economy and financial markets are interconnected. As Covid has demonstrated, events on one side of the planet can trigger shockwaves on the other side.

“The average American household will bear the brunt of Vladimir Putin’s invasion of Ukraine,” said RSM chief economist Joe Brusuelas.

Hope remains that there will be no invasion and that recent signs of de-escalation continue. Otherwise, there are plenty of ways for American consumers to get caught in the middle of this beer conflict.

Oil prices have jumped in recent weeks to levels not seen since 2014, in part because an invasion of Ukraine could derail Russian energy supplies.

Russia is an energy superpower, producing 9.7 million barrels a day last year, according to Rystad Energy. That’s second only to the United States and equates to more oil than Iraq and Canada produced together.

Supply is already failing to keep up with demand, and investors are keenly alert to any further supply shortages that could arise in a variety of ways, including war-damaged infrastructure, sanctions against Russia, or the decision of Moscow to militarize exports.

JPMorgan has warned that if Russian oil flows are disrupted by the crisis, oil prices could “easily” soar to $120 a barrel. In the unlikely event that Russian oil exports are cut in half, crude will climb to $150 a barrel, JPMorgan said.

A dramatic spike in oil prices could be at least partly offset by the release of emergency stocks by consuming countries and increased production by OPEC.

Still, a further spike in oil prices would raise prices at the pump, which lag behind developments in crude prices. The national average price of a gallon of gasoline is already at a seven-year high of $3.50 a gallon, according to AAA.

Oil prices fell sharply on Tuesday on hopes that Russia and Ukraine will pull back from the abyss.

Even if oil only climbs back to $110 a barrel in an escalation of tensions, the year-over-year inflation rate would climb above 10%, according to RSM analysis shared with CNN. This is up from the current 7.5%.

US inflation has not climbed to 10% since 1981.

Not only would prices at the pump rise, but higher oil and natural gas prices would drive up heating and electricity costs.

Higher energy prices would make air travel more expensive and keep transportation and input costs high for businesses already struggling with rising expenses. Companies would most likely pass on at least some of these higher costs to consumers in the form of price spikes.

Beyond energy, other commodities could experience price volatility. Russia is a major producer of metals, including aluminum and palladium. Russia is also the biggest exporter of wheat, while Ukraine is a major exporter of wheat and corn.

“All of this would happen at a time when commodity supplies are more stressed than they have been in a generation,” wrote David Kelly, chief global strategist at JPMorgan Funds, in a report released Monday.

Of course, inflationary pressures would probably be even stronger for Europeans, given their proximity to the crisis and their dependence on Russian energy.

Investors were glued to the latest developments in the Russian-Ukrainian crisis.

Investors hate uncertainty. It’s easy to see how a full-scale invasion of Ukraine would trigger a massive sell-off in stocks as investors face the possibility of an oil shock, higher inflation and a sanctions regime. confusing.

A prolonged market downturn would wipe out the wealth that families have accumulated in the stock market and in retirement accounts. Market instability could also undermine consumer and business confidence.

Stocks have a history of bouncing on geopolitical fears, although the sample size is relatively small. And it is impossible to say how the markets would react in the current environment.

A Russian-Ukrainian conflict would threaten to slow the US economy by worsening inflation and increasing uncertainty.

RSM analysis found that a jump to $110 oil would lower US GDP by one percentage point.

It’s not as dramatic as the impact on inflation, but it’s still significant given that the US economy hasn’t fully recovered all of the jobs lost during Covid.

If inflation were to rise above 10%, the Federal Reserve would come under pressure to step up its fight to control prices.

This could mean an acceleration of interest rate hikes to calm inflation.

Upcoming Fed interest rate increases will increase borrowing costs for consumers on everything from mortgages and auto loans to credit cards. Mortgage rates have already reached pre-Covid levels in recent weeks, presenting a new challenge to budding homebuyers.

The Fed could choose to ignore the intensification of inflation as a temporary phenomenon fueled by the Russian-Ukrainian situation. However, this strategy did not work well last year as the Fed finally abandoned its “transitional” description of Covid-related inflation.

US President Joe Biden warned on Tuesday of the possibility of Russia unleashing a conflict across cyberspace.

“If Russia attacks the United States or its allies through asymmetric means, such as disruptive cyberattacks on our businesses or critical infrastructure, we are ready to respond,” Biden said.

The Colonial Pipeline hack last year showed just how disruptive a cyberattack can be in the real world. The cyber intrusion shut down one of America’s most important pipelines, sparking panic buying that left many gas stations across the Southeast empty.

A cyberattack is just one example of how the Russian-Ukrainian situation could spill over into everyday life.

“Wars move in unpredictable ways,” JPMorgan’s Kelly said. “No one should assume they can see all the impacts of a war in its infancy.”

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