The financial markets are significantly influenced by various factors, where continuous fluctuations and price movements occur due to external events.
To be among the more successful traders who execute strategic and accurate trades, you must be able to both identify the presence of these factors, and successfully establish how they will impact the markets you’re investing in.
One of the major factors right now is the energy bill crisis flooding the UK.
Predominantly a result of Russia’s invasion of Ukraine, the UK has seen huge surges in the price of energy bills, which seems to show no sign of slowing down in the near future.
Naturally, this plays a huge role in the way the financial markets have responded in recent months.
To make more informed trades, it’s important to look at what these affects are across the main markets.
So, how have energy bill increases affected the financial markets?
Commodities
If you’re trading on the commodity market, then you’ll likely see how the rising energy bills have had a huge impact on overall market performance.
Russia is the main supplier of Europe’s natural gas (around 40%). Therefore, the trade sanctions prohibiting Russian imports had a massive impact on the supply and demand for gas.
With Europe, as well as other countries in the world, needing natural gas, and the main supplies being cut down, Natural Gas (NATGAS) as a commodity surged in value.
From March to May, the value of NATGAS increased from $4.7/MMBtu to over $8/MMBtu.
As the scarcity of natural gas struggles against Europe’s – and the rest of the world’s – need for it, the rising energy bills will continue to reflect the increased value of commodities, such as this one.
Stock
With energy bills on the steep uprise, the stock market has seen significant changes in the price of shares across the globe.
One of the more prominent impacts has been on the share prices of oil companies, who are now seeing a rise in popularity and demand, considering the restrictions of oil imports from Russia, and thus, the stronger need for it.
Occidental Petroleum Corporation (OXY) has seen a continuous rise in share prices throughout recent months, as more investors are noticing the importance of oil companies at this time, and their role in supplying the world.
The value of OXY saw a 17.12% increase from 17 March to 17 May.
In these two months alone, the soar in energy bills and demand for oil to heat households across the world, has greatly benefited business shares such as OXY, who are high-demand suppliers in the current energy crisis.
As prices continue to soar, it’s likely that stocks such as these will keep drawing in more investments, and rising steadily in the face of high demand for energy.
Foreign exchange
The foreign exchange (forex) market has also felt a strong impact from the rising cost of energy, and the currency values of many countries have seen significant price movements as a result.
For instance, with energy prices becoming unmanageable for many, the UK has descended into a cost-of-living crisis, with inflation hitting a record 40% high.
With more people struggling to afford the soaring energy bill prices, the massive inflation rate has diluted the value of the Great British Pound (GBP).
For instance, the price of the GBP/US Dollar (USD) has decreased rapidly from $1.34 on 1 March to $1.22 on 13 May.
As the UK struggles with unfavourable energy bills, you can comfortably predict a continuous decrease of the GBP’s value against other currencies, such as USD.
With a keener eye on the energy bill crisis, you should be further informed on how the financial markets are responding to it, enabling you to make more knowledgeable trades on every financial market.
