Commodities have risen over the past few days when Russia-Ukraine combat concerns triggering problems from Russia can be influenced. Although there has been no resolution of disputes, market reactions have subsided to some extent because market participants assess the implications of geopolitical development.

Russia is a major player in the commodity market and increases the risk of supply driven by commodities to multi-year highs and some fresh to fresh throughout this week. In the energy complex, WTI and Brent crude surged to 2008 highest Europe prices soared to all time high. In industrial metal, copper, nickel, aluminum surged to record high levels while zinc tested 2007. In the midst of other commodities, palladium and wheat also surged to record high levels. Meanwhile, gold surged to the highest August 2020 amid increasing Safe Haven demand and increased inflation worries.

Commodities regulate the highest new this week, however, the momentum has been stopped when market participants assess the Russian-Ukrainian situation. The prospect of resolution rose earlier this week as aide to the President of Ukraine showed that the country might be willing to consider the request of Russian neutrality if we received security guarantees. However, expectations of resolution, however, meetings between Russia and Ukrainian Foreign Minister failed to resulted in a break.

Commodities stalled in the midst of signs that the US and allies can take a measured approach while imposing Russian restrictions. The US this week announced a complete ban on Russian energy exports, however, this step was mostly anticipated.

The UK announced that it would remove crude oil imports from Russia for a year but did not put limits on coal or natural gas. The European Union, which is the main goal for Russian energy exports, however, chooses to avoid restrictions on Russian exports due to high dependence.

Rally in all commodities stopped also because market participants assess the implications of higher prices. Continuous price increases will challenge demand growth. Increasing energy and commodity prices, can further aggravate inflation pressures that threaten economic activity and thus demand.

We see some profits moving commodities as well when market participants assess how the central bank will respond to the latest developments. The European Central Bank, at this week’s monetary policy meeting, warned about the risk of economic downturn but also announced that bond purchases can end in the third quarter if economic data allows it.

However, the European Central Bank (ECB) shows that the end of bond purchases may not be followed by rising interest rates and any steps will be gradual.

Focus now shifts to the Fed meeting next week. Market participants have reduced expectations that the Fed can raise interest rates aggressively as a growth of geopolitical tension challenges. However, the Fed is expected to maintain an aggressive attitude with inflation beyond control. The latest data shows that consumer prices rose 7.9 percent in February, the fastest step in 40 years.

Commodity market players are also shaken by fears that steps can be taken to limit volatility and this might also cause some profits. Nickel prices rose more than 100 percent and violated $ 100,000 per ton on March 8 and steps forced LME to temporarily suspend trade. SHFE also suspended trading several nickel contracts.

Comodity rally sharply in the last few days and this made it vulnerable to profit taking. We may see volatility continuing because market participants assess requests for demand inventory and the attitude of the monetary policy of the main central bank. However, the supply risk is still towering and falling sharply may not come unless there is a concrete effort to resolve disputes.