As the conflict between Russia and Ukraine intensifies, U.S. consumers are bracing for economic turmoil.
U.S. stock markets sank Thursday morning after Russia launched an invasion on Ukraine, though they ended the day in positive territory after remarks from President Biden.
In light of the turmoil, it is clear this conflict could have ramifications far beyond Eastern Europe.
“The [falling markets] affect people’s investments and general view of the economy, so this could filter through into more cautious consumer behavior and have a minor negative impact on retail sales,” explained managing director of GlobalData Neil Saunders.
What’s more, Russia is one of the top three leading oil producers, with roughly 13% of the market. Given the conflict, supply chain slowdowns could yield higher oil prices — which were already sitting at more than $100 per barrel this morning — and could hit U.S. consumers at the pumps.
“This crisis reinforces the notion of the mutual interdependence of the global economic political environment,” said Brian Marks, a senior lecturer of economics and business at the University of New Haven. “The bottom line is we’re all connected and what happens between Russia and Ukraine will impact everyone around the world right down to the consumer.”
The uptick in oil prices could send prices at the gasoline pump to between $4 and $6 a gallon, Marks said. At the same time, food prices will also likely increase given the impact on Ukraine, a major exporter of food that is often referred to as the “breadbasket of Europe.”
“A price hike in energy and commodities affects the ability of countries and economies around the world to produce goods at lower costs and battle inflation,” said Yoni Mazor, chief growth officer and co-founder of Getida, which specializes in auditing and reimbursements for Fulfillment By Amazon.
The sharp uptick in basic goods comes amid an existing period of record high inflation in the U.S. Consumer prices rose by 7.5% in January compared to a year ago, according to the Bureau of Labor Statistics’ monthly report. This number was up from the 7% growth in December and represented the highest inflation rate since the 12-month period ending in February 1982.
“My administration is using every tool to protect American families and businesses from rising prices at the gas pump. And we’re taking active steps to bring down the cost,” said President Biden in a press conference on Thursday. “And American oil and gas companies should not — should not — exploit this moment to hike their prices and raise profits.”
As economic trends dictate, when commodities like oil and food break the bank, consumers are less likely to spend their money on other items that are not immediately necessary, like luxury apparel or accessories.
“That will impact our ability to buy other goods,” Marks said. “Disposable income is less available to purchase other things.”
At the same time, people are more likely to stay at home during a time of conflict, which could impact the already badgered tourism industry. However, Marks noted that less travel abroad could boost opportunities for travel and tourism in U.S.
“People are less likely to travel during a conflict, and this conflict doesn’t look like it’s going to be over anytime soon,” Marks said.
President Biden, however, stated that U.S. sanctions imposed against Russia — including export blocks on certain technology — will help end the conflict sooner rather than later.
“The notion that this is going to last for a long time is highly unlikely,” he said.