‘We’re in for rollercoaster ride’ – Here’s how to trade during global conflict
Global markets continue to be rattled by Russia’s ongoing invasion of Ukraine late in February. Since then Russia has been hard hit by global sanctions with the country’s currency, the Rouble, being devastated and high inflation has seen its financial institutions crash.
Global markets continue to watch the situation in Ukraine with great interest.
Oil prices continued to move higher following a price surge; Brent crude futures gained 2.2% to $115.40 per barrel after hitting a high of $118.22 per barrel. US crude futures also climbed 2.4% to $113.23 per barrel.
Fred Razak, senior trading specialist at CMTrading, helps us make sense of market volatility and shares advice on how to trade during the global conflict.
Why has the Ukraine conflict affected the markets?
Razak said: “War disrupts everything; supply of oil, food production – it affects all markets, especially if it’s one major state. Now we’re talking about Russia and Ukraine. Even though Ukraine is a small country and not so essential for the world economically, Russia, however, is the largest producer of oil in the world. They are also a major player in the Economic Forum. When one of the largest distributors or producers of oil in the world has a conflict with another country, and sanctions are imposed, then that will affect the stability of the entire world.
“The anticipation of what could potentially happen if war was to spill over, let’s say, to the EU, is causing insecurity and volatility. One of the arguments that Putin has stated is that he doesn’t want to be at the back door of NATO by buffering Ukraine. If he takes over Ukraine, he’s going to be in Nato’s front yard. So, it’s kind of interesting how some of these arguments are being made; the very thing that Putin’s trying to avoid, he’s implementing himself.
“So oil is going to be affected and we’ll see some pressure in selling out of the markets. Gold is going to be affected because that’s still a safe haven investment.”
What are some of the market trends you’ve picked up during the conflict?
Razak said: “We in for a rollercoaster ride with some tremendous gaps between the up and down cycles. We’ve seen some tremendous moves in both directions. First, we tanked about 2000 points, and then we rallied about 1500 points – we’re in a tremendous range right now.
“The markets don’t need to be agitated by a conflict it just exasperates things. Since the markets are already in a recessionary climate, we don’t need much fuel to spark a significant sell-off. We’re also seeing that gold is coming back into play and that it’s still a haven trend on the upside that is picked up on.”
Why are commodities such as gold, wheat, and oil spiking?
Razak said: “Anytime you have some sort of conflict, the distribution of commodities is going to be imbalanced either through production or supply. In terms of business, you’re focusing on the potential spillover of how far this conflict could spiral into. So commodities are the first market the conflict will affect due to simple supply and demand. If there’s war, there’s more demand for oil yet production is affected. Food becomes scarce because wheat production is affected during the conflict.
“Russia is a huge country and they have huge stockpiles of supplies. I would imagine that Putin has already considered this and was a few moves ahead of NATO, EU, and the USA, knowing very well that he was going to be put into sanctions. Despite the risk, he wanted to continue this conflict. It’s mostly all this is an all factored in.”
How should traders react to the ongoing conflict?
Razak said: “Be vigilant and just know that a lot is going to be news-driven. There are going to be a lot of trading opportunities.
“I know traders that make $30 000 – $40 000 and it’s not even as though they’re trading big. It’s just trading the news. This kind of volatility creates some tremendous opportunities in the market.
Advice for traders?
Razak said: “Trade responsibly. There are going to be a lot of moves in the markets and a lot of opportunities, but you want to trade responsibly. You want to be there among the moves and be able to identify what kind of potential you can grab out of the market. Cut your losses short. Focus on the volatility, focus on jumping in, jumping out quickly without drawing any conclusions as to which particular direction the market is going. The market doesn’t have any rhyme or reason, right now it’s only news-driven; Russia could end its occupation of Ukraine tomorrow or continue its invasion indefinitely. Markets will continue to react as long as this conflict persists. Traders are going to have to react accordingly and spot the opportunities as they happen.