How Russo – Ukrainian war affected commodity returns

Abstract

This study investigates the impact of the Russo-Ukrainian war on commodity returns across 6 sectors: industrial metals, precious metals, energy, grains, softs, and livestock. Employing panel data analysis and the panel event study method in Stata with eventdd command, I analyze monthly returns to assess the effects of the conflict on commodity markets. Contrary to initial expectations, my findings indicate minimal immediate effects of the war on commodity returns, with returns exhibiting stable negativity during all the conflict period. However, through a robustness analysis utilizing cumulative monthly returns, a distinct pattern emerges. In post-war, I observe a significant increase in returns, particularly obvious in the energy and grains sectors, as well as the entire commodity market during almost the first 6 months following the conflict, because of high demand and low supply from sanctions and limited exports from ukrainian ports. This suggests that while the direct impact of the war on commodity returns may be limited, the cumulative effects reveal a more nuanced picture, highlighting the heightened volatility and potential opportunities in specific sectors in the aftermath of geopolitical turmoil. In short, by integrating panel data analysis with cumulative returns assessments, I provide valuable insights into the differential impacts of the Russo-Ukrainian war on various commodity sectors, informing suppliers and policymakers alike.