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NERVOUSNESS, ANXIETY, PARANOIA — whatever you want to call it, cortisol levels are noticeably rising across financial markets this week as the world tries to get to grips with a rapidly shifting economic and geopolitical landscape.

Stocks are selling off and commodities like oil, gas and metals are getting more and more expensive as both inflation and recession fears, like colliding weather fronts, combine with dramatic impact.

 Take the price of nickel, for example. Used in common alloys like stainless steel but also in the production of lithium-ion batteries used in electric car batteries, the price of the metal has more than doubled in the past 24 hours, hitting $100,000 a ton by 8am this morning.

Why? Speculation, of course. Russia is a key global producer of nickel and despite the fact that supplies have yet to be affected — even amid the wide range of tough Western sanctions the Russian economy has been saddled with since the invasion of Ukraine — markets are pricing in that possibility.

That’s essentially what’s happening across commodity markets in general at the moment. Russian gas flows to Europe have not, so far, been dented by the war in Ukraine or the sanctions. Yet the price of benchmark Dutch TTF natural gas for delivery in April briefly rose to record levels yesterday amid fears of retaliatory moves by Moscow and the prospect of a US energy embargo. 

Oil prices are also see-sawing this morning after touching a 14-year high yesterday as markets price in more disruption to Russian production and supply to the rest of the world.

But although these market movements are largely preemptive, the impact on the Irish economy could become very real very quickly. Consequently, Irish households and businesses are in line for further bill increases and higher prices at the pump and in supermarkets.

Some energy industry experts are estimating that electricity bills could jump by a further 50% this year, reports Barry O’Halloran in The Irish Times this morning, amid the volatility. Gas-fired power stations produce about half of Ireland’s electricity not to mention the volume of the stuff we we use to heat our homes. If Europe does bow to US pressure to include Russian energy exports on its sanctions list, industry sources believe gas rationing could become a reality in Ireland.

All of this raises the prospect that Europe is entering a period in which economic growth stagnates as businesses and consumers grapple with higher costs while prices continue to march higher. Known as ‘stagflation’, the phenomenon roiled developed economies in the 1970s, triggered by the ‘oil shock’ that followed the 1973 Arab-Israeli war. 

But that may well be overstating it.

We are no longer living in the 1970s: oil intensity (i.e. barrels of oil per $1000 GDP) has fallen strongly over the last decades, both in the OECD and in the non-OECD world. pic.twitter.com/KgUzAzy2MX

— Philipp Heimberger (@heimbergecon) March 8, 2022

“Even if some countries could face quarters of contraction,” writes Chris Giles in The Financial Times today, “many economists still think that higher energy prices will lower growth but not push the Eurozone into a prolonged recession this year”. Either way, it’s impossible to ignore the smell of fear this week.