European Corporates: Muted Impact of Geopolitical Tensions on Energy

This report was produced by KBRA, a member of IPFA. 

This report explores the impact of geopolitical tensions on European corporations and energy markets. Rising geopolitical tensions pose indirect risks for corporate profitability and inflation in Europe via their potential impact on energy prices, transportation costs, and feedthrough into broader macroeconomic conditions. To date, the impact of the events in Ukraine and the Middle East and the ongoing risk of escalation have had a relatively mild influence on commodity prices. In contrast, shipping costs have experienced more volatility, and their impact on corporate profitability will largely depend on the current tensions being sustained. Despite a deterioration in terms of geopolitics, global economic forecasts and sentiment have improved, and energy prices have broadly remained range-bound.