Economic Fallout From Russia’s Invasion Will Be ‘Modest’—But Inflation Will Surge Higher, This Expert Predicts

The global economic impact of Russia's invasion of Ukraine is likely to remain modest, according to a recent note from Moody's.

Russia's invasion of Ukraine and the subsequent surge in oil prices are bad timing for the U.S. economy.

Stock prices are down 10% from all-time highs at the start of the year as investors prepare for higher interest rates, but the Russia-Ukraine conflict could heighten the risk of a sell-off.

If inflation expectations start to rise as a result of higher oil and gas prices, the Federal Reserve will have little choice but to raise interest rates more aggressively than previously forecast.

He predicts that if oil prices stay at around $100 per barrel, the economy will fall.

It would only have a modest impact on the U.S. economy, according to the economist, who believes that the most likely scenario is that Russia goes no further than Ukraine and the disruptions to energy markets.

Lindsey Bell, Ally's chief markets, agrees that the impact on the U.S. economy isn't likely to be significant.

The Fed is going to have to be even more careful and tolerant of higher inflation because of the Russia invasion, according to the chief economic advisor.

Tangent:

The Russian economy is set to take a massive hit from the invasion, and the global economic impact will likely remain modest. Although Europe's economy is more likely to take a hit, its economic recovery will continue. The sanctions will cut Russia's reserves by more than half, making it more difficult for the central bank.

Big Number: $80 Billion

If the price of oil stays at $100 per barrel for a while, it will cost US consumers more money at the gas pump. If the conflict jeopardizes global supply, many experts have predicted that oil will surge up to $130 per barrel. Even if Russian energy exports decline, a potential nuclear deal between the United States and Iran could help offset lost supply in an already tight market.

What To Watch For:

There are other scenarios for how Russia's invasion of Ukraine might play out. It is possible that oil prices will spike closer to $150 per barrel if Russia stops exporting oil and natural gas. The darker scenario is that Putin extends his invasion beyond Ukraine, which would cause a global recession.

The stock market fell 400 points as investors worried about new sanctions on Russia.

Russia's invasion of Ukraine has sent energy prices soaring.

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The Federal Reserve is more important for stocks than the Russia-Ukraine Conflict.