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Moody’s warned that the Russia-Ukraine crisis will “only exacerbate the situation for companies in many industries,” especially those reliant on energy resources.
Europe, in particular, will feel the most pain from the energy price spike, because it is dependent on Russia for natural gas. Oil prices have surged worldwide, driving up prices for gasoline and raising the cost outlook for airlines and other industries, such as plastics, that rely on petroleum.
The Russia-Ukraine conflict also could pile further pressure on the worldwide computer chip shortage, which began during Covid and has been at the heart of the spike in new and used car prices.
Moody’s pointed out that Russia supplies 40% of the world’s palladium, a key resource used in the production of semiconductors. Moreover, Moody’s said Ukraine produces 70% of the world’s neon, a gas used in making computer chips.
“We can expect the global chip shortage to worsen should the military conflict persist,” Uy wrote.
Neon prices skyrocketed during the 2014-2015 conflict in Crimea. Even though chipmakers have stockpiled resources, Uy said that inventories can last for only so long.
“If a deal is not brokered in the coming months, expect the chip shortage to get worse,” Uy said, adding that this will pose significant risks to automakers, electronics companies, phone makers and other industries.
Uncertainty ahead
Beyond computer chips, Moody’s pointed out that the Russia-Ukraine crisis has the potential to raise the costs of transportation, the most energy-intense of all industries.
“While the world will be relieved to have seemingly overcome the Omicron variant,” Uy wrote, “a new challenge has emerged where the endgame is not clear.”