What's going on?

The US government warned over the weekend that Russia could invade Ukraine as soon as this week.

What does this mean?

Russia has spent weeks assuring wary onlookers that it has no intentions of invading Ukraine, but this isn�t the US�s first rodeo: its government�just declared that the move might only be a matter of days away. That made investors nervous � not least because Russia is the biggest supplier of natural gas to Europe, with about a third of its exports flowing through Ukrainian pipelines. It�s the world�s third-biggest oil producer too, meaning any conflict could threaten supplies of the slippery elixir. All that to say, this might be why European natural gas and electricity prices rose more than 10% on Monday, and why the price of oil hit a seven-year high.

Why should I care?

For markets: Dinner�s on you.
Oil�s price now sits at $93 a barrel, with some analysts expecting it to hit as much as $100 by the end of February. And if that happens, Bloomberg has calculated that European and US inflation will be around half a percentage point higher in the second half of this year than it would�ve been otherwise. Consider too that Russia and Ukraine account for nearly a third of wheat and barley exports between them, which would mean any conflict could limit their supply and push overall inflation up even higher.

The bigger picture: The economy cannae take it.
Consumer spending is bound to be hit by these higher energy and food bills, which would have major consequences for economic growth. Higher inflation could likewise force central banks to raise interest rates faster than planned, which would discourage borrowing and spending even more. So Morgan Stanley might have a point: the investment bank said on Monday that the Russia-Ukraine conflict could end up pushing the global economy into recession (tweet this).