Ukraine Conflict: Five Ways Life Could Get More Expensive

Western countries have imposed severe sanctions on Russia in an effort to cripple its economy and weaken its military effort.

But the economic fallout could also have a major financial impact on people around the world - from the availability of food to the cost of energy and petrol.

People in the UK and Europe are already paying high prices for energy and fuel.

The Russia-Ukraine conflict is expected to drive these even higher and has already caused the oil price to jump to its highest level in more than seven years, while future gas prices have increased 60% in just one day.

Martin Young, an analyst at the banking group Investec, has warned that household fuel bills in the UK could reach an annual £3,000, while motoring groups said average petrol prices had already hit a record high of nearly 149.5p on Wednesday, with diesel at 152.83p.

Russia is the second-biggest exporter of crude oil, and the world's largest natural gas exporter, which is vital to heating homes, powering planes and filling cars with fuel.

The UK gets only 6% of its crude oil and 5% of its gas from Russia, but the EU sources nearly half of its gas from the country.

If one country reliant on Russian supplies receives less gas, they have to replace it, impacting the supplies of gas for other countries - that's why British energy prices and bills are still affected in a similar way to European ones.

There are now fears President Vladimir Putin might "weaponise" Russia's natural resources by reducing supplies of gas to Europe in response to sanctions. Politicians in Germany are calling for a "national gas reserve" to be created to protect consumers from price shocks.

But customers could still be hit in other ways - if airlines decide to pass on the rise in costs of aviation fuel, the price of a plane ticket could get more expensive.

The cost of everyday food items might rise in places like Turkey and North Africa, which rely on wheat and corn from Russia and Ukraine.

Both countries, once dubbed "the breadbasket of Europe", export about a quarter of the world's wheat and half of its sunflower products, like seeds and oil. Ukraine also sells a lot of corn globally.

Analysts have warned that war could impact the production of grains and even double global wheat prices.

More than 40% of Ukraine's wheat and corn exports went to the Middle East or Africa last year - and disruptions to supply could affect availability in these areas.

The UK, by contrast, typically produces more than 90% of the wheat consumed in the country. But farmers might find themselves paying more for fertiliser, which is one of Russia's biggest exports.

Inflation, which measures how fast the cost of living rises over time, hit 7.5% in January in the US - the highest level seen there since February 1982 - and rose by 5.5% in the UK.

But it could hit close to 10% in major Western economies if the cost of energy and food is pushed up by dwindling supplies cause by the Russian-Ukraine conflict, according to the Centre for Economics and Business Research.

Such a figure might encourage the US Federal Reserve or the Bank of England to increase interest rates. The idea is that when borrowing is more expensive, people will have less money to spend. As a result, they will buy fewer things, and prices will stop rising as fast.

But in the UK, for example, about 2.2 million homeowners with mortgages linked to the Bank of England's base rate would see repayments go up, putting further pressure on household budgets that are already being squeezed by the cost of living.

Russian stocks crashed by as much as 45% in the wake of the Ukraine invasion, with banks and oil companies among the worst affected.

It also led to steep falls on stock markets elsewhere around the world: in Europe the UK's FTSE 100 index fell more than 3% while Germany's Dax index was nearly 5% lower.

Many people's reaction to stock market changes is that they are not directly affected, because they don't invest money in stocks and shares. But there are millions of people with a pension whose savings are invested in the stock market.

Widespread falls in share prices, such as those triggered on Thursday, are likely to be bad news for pension savers because the value of their savings pot is influenced by the performance of investments.

Some investors or savers might look to protect their money or assets by moving them to traditional "safe havens", like gold, especially as the markets are likely to see more volatility as the crisis develops.

But pension savings, like any investments, are usually a long-term bet and advisers say it's important not to panic about short-term movements up or down.

The car industry was already reeling during the pandemic from a chip shortage and supply chain problems.

In the UK, one in five nearly-new cars are now selling at more than their brand-new equivalents, as their values have been pushed up, according to the Auto Trader website.

Russia is one of the world's largest suppliers of metals used in car manufacturing, such as nickel, which is used in lithium-iron batteries, and palladium, which is used in catalytic converters.

If it decided to cut off supplies of these metals in retaliation to sanctions, the supply problems could worsen, with car firms having to find alternative sources.

Countries such as South Africa and Zimbabwe produce substantial amounts of palladium, but demand has been increasing and prices could rise as a result.

Russia is also home to manufacturing hubs for brands like Stellantis, Volkswagen and Toyota. Factories in the region could struggle to operate under sanctions, potentially hampering production and the availability of new cars.