Expecting an Escalation in Russia-Ukraine Crisis? Play These ETFs

Talks about Russia-Ukraine tensions are back this year after 2014. Russia’s Crimea annexation (previously a Ukrainian territory) had then hit headlines thanks to its military move and the resultant standoff with the West as the Crimean maneuver was viewed as an utter violation of international law by the West. In protest, the United States and the European Union (EU) imposed some bans on some Russian diplomats.

This year too, the Russia-Ukraine crisis seems to have escalated. If the crisis worsens, investors may benefit out of some ETF strategies. Let’s figure out.

Brent Crude & Natural Gas

United States Natural Gas Fund, LP UNG has been gaining this year. It is already up 15% in 2022. If Russia tensions grow,gas prices in Europe — which soared to new highs last year — will go up further, per Capital Economics, quoted a CNBC article. Russia is the provider of about 35% of Europe’s gas.

Europe is highly dependent on Russia for energy, importing about 40% of its energy requirement. Thus, at the economic juncture when COVID-19 is a big crisis and inflation is soaring, the European Union is less likely to enforce a commodity export ban on Russia in 2022. Still, any supply disruption may push up Brent crude prices higher in a market already characterized by tight supplies. United States Brent Oil Fund, LP BNO is an intriguing bet in this regard.

Wheat

Russia is a commodity-rich nation. Apart from oil and coal, wheat and palladium are also abundant in Russia. Ukraine is also one of the largest exporters of wheat selling a large portion of its grains to Egypt and to other Middle Eastern countries and Africa. So, the Russia-Ukrainian crisis would disrupt Ukraine’s export activity that could push up wheat prices to quite a high level. Teucrium Wheat ETF WEAT should thus be closely watched.

Corn

Corn could also rally higher if tensions flare up in Ukraine, which is a leading exporter of the grain. The Russia-Ukraine strife could play its role in driving corn price this year.  Teucrium Corn ETF CORN may be watched carefully for a likely outperformance.

Palladium

Russia is rich in palladium too. Russia's Nornickel is the world's largest palladium producer. Investors should note that Palladium jumped to a record in May 2021 before slumping and becoming the worst-performing major commodity of 2021. This has corrected the metal’s sky-high valuation. The metal, 85% of which is used in pollution-reducing catalytic converters in gasoline engines, has witnessed the slump this year due to the global chip shortage that curtailed consumption of it in the auto industry (per a minning.com article).

However, industry players are expecting a rally in the metal in 2022 thanks to lower valuation and gradually-easing chip crunch situation. Russia-Ukraine crisis, if it all heightens, may also disrupt the supply situation and boost the price of palladium. Aberdeen Standard Physical Palladium Shares ETF PALL has gained about 7% past month.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.