Brent-indexed crude oil prices climbed above US$100 a barrel for the first time since 2014 after Russia declared war on Ukraine.

On Thursday, Russian President Vladimir Putin announced a military operation in Ukraine.

Besides, crude oil prices surged by 5.50%, near US$97.22 per barrel on the NYMEX WTI index.

Notably, Russia is one of the world's top crude oil producers, and any western sanctions against Russia will stiffen the global supply.

For India, the development assumes significance as the country is import-dependent to fulfil its crude oil needs.

Notably, the rise in crude oil prices can escalate domestic prices, thereby triggering inflation.

According to Hetal Gandhi, director of CRISIL Research, the conflict between Russia - the second-largest exporter of crude oil with a 12% market share—and Ukraine have expectedly raised already-elevated crude oil prices to eight-year highs.

"The prices could stay over US$100 per barrel in the near to medium term unless the Organisation of the Petroleum Exporting Countries (OPEC) decides to increase output materially. Interestingly, over the past three months, OPEC members haven't been meeting their production targets, which has influenced prices. The upshot is energy and trade-deficit negative for India since we import nearly 85% of our crude oil requirement," she says.

CRISIL also points out that the most significant impact of the war would be felt in natural gas markets. Russia produces about 17% of it and has a 25% share of total gas exports.

Thankfully, Ms Gandhi says, "India's gas requirements are locked in contracts with Qatar, the supply of which is unlikely to be affected if the war does not spillover. However, the impact of higher gas prices would be felt in India, just like everywhere else. Europe will bear the brunt since its dependence on Russian energy is very high—as much as about 57% of the continent's gas requirement is met by Russia."  

"Global production and supply of energy will be in a state of flux in the short-term and will impact countries dependent on imports. Consequently, spot LNG prices, which averaged $27-30 per metric million British thermal units (mmBtu) in January 2022, could rise to $35-40 if the strife continues," CRISIL says.

Contrary to the common perception, Hitesh Jain, lead analyst of YES Securities, feels evolving oil price trajectory does not have a material impact on global equities. He says, "The global oil demand and gross domestic product (GDP) ratio has ranged from the high of 7% during the oil shock in the 1980s to the low of 1% in the late 1990s. In terms of recent history, the ratio has averaged 3% for the last 20 years and the current ratio is around 2.6 in 2021. The vagaries of oil markets have not significantly dented global equity market capitalisation, barring the 1990 and 2008 global financial crisis (GFC) years."

"Given the prevalent supply and demand dynamics, we present a scenario analysis basis the varied oil price projection for 2022. If we assume oil averages around $60 per barrel (bbl) this year, the global oil demand/global GDP ratio will remain well below the last two-decade average. If oil averages $80 per bbl or $100 a bbl, the ratio will remain benign. In case oil averages $120 per bbl, the ratio can move above 4. However, there have been several occasions in the past where the ratio as high as 6 has not eroded market capitalisation," Mr Jain says.

Meanwhile, the war has accelerated the prices of precious metals too. While global equity indices fell, commodities, including gold, surged as hostilities started.

Concurrently, gold prices rallied, with MCX Gold April futures surging by 2.25% to Rs51,500 per 10gm (gram).

Besides, 'Spot Gold' prices at COMEX traded near US$1,940 per ounce, breaching near-term resistance of US$1,920 per ounce while the next target seems at US$1,970 per ounce on geopolitical risk.

Notably, Russia is one of the world's top producers of gold. Any Western sanctions against Russia will stiffen the global supply.

Furthermore, silver prices rallied by 2.31% on COMEX. The Spot COMEX silver prices traded near the breakout levels at US$25.10 per ounce of the medium-term chart.

On MCX, Silver traded at Rs66,447 per kg.