Global tensions are pushing commodities prices up in a volatile week

This week, there will likely be a new round of volatility as investors cautiously monitor escalating tensions between Russia and the West amid a busy economic calendar with OPEC+ meeting, Powell testimony, EU inflation data, and NFP on the agenda. Escalating sanctions against Russia - including blocking some Russian banks from the SWIFT international payments system - over its invasion of Ukraine, which led President Vladimir Putin to put his country's nuclear deterrent on alert, set markets on elevated uncertainty. Commodity prices on the rise and eurozone inflation data for February are expected to reach another record high, highlighting the effect of rising energy prices. The U.S. employment report for February is likely to show solid gains in the labour market. Jerome Powell's testimony may yield insight into monetary policy's impact of the war in Ukraine. As Western sanctions on Russia escalate, the U.S. Dollar trades higher against a basket of major currencies early Monday. Support for the index comes mainly from the weakened Euro, which opened the session down over 1% versus the greenback.

OPEC+ meeting on Wednesday

When both sides are attempting to make the war more costly to the other, could Russia tend to raise the energy prices for the West? Escalating war came days ahead of the OPEC+ meeting on March 2. As part of this initiative, the group expects to ramp up its supply by 400,000 barrels per day (bpd) in April.

Over the weekend, OPEC+ revised its forecast for the oil market surplus for 2022 downward by about 200,000 bpd to 1.1 million bpd. The data also showed stocks in the developed world falling 62 million barrels below the 2015 to 2019 average by the end of the year, highlighting how tight the market is. According to a separate report, in January, OPEC+ produced 972,000 bpd less than it agreed to.

Nonfarm Payroll is highly expected on Friday

There are expectations that Friday's nonfarm payrolls report for February will reveal that the economy added 450,000 jobs to its total for the month. It is forecast that unemployment will decline to 3.9%, and average hourly earnings will rise annually at a 5.8% rate.

The payrolls processor ADP will release figures on private-sector hiring on Wednesday. The Labor Department will publish its weekly report on initial unemployment claims on Thursday.

Among the economic calendar highlights is a survey by the Institute of Supply Management for February, which may reflect a rebound in business activity following the impact of the Omicron wave.

Chairman Powell Testimony 

As sanctions against Russia escalate and market volatility remains high, Fed Chair Jerome Powell must reassure investors this week that the Fed will take steps to control soaring inflation as the economic outlook becomes more uncertain.

Powell will testify before the House Committee on Financial Services on Wednesday, followed by a Senate Banking Committee hearing on Thursday.

Fed officials have indicated that an interest rate increase will happen at their March meeting to curb inflation at a 40-year high. The Fed must now weigh the geopolitical and economic impact of the conflict in Ukraine against mounting aggressive inflation-fighting efforts.

Commodities prices are set to rise

The Russian invasion of Ukraine will drive up energy prices, while additional strains on household spending will slow the economic recovery, already slowed by the Omicron wave.

After Russia put its nuclear weapons on alert on Monday, oil prices climbed to $100 a barrel again. European gas prices have also surged amid concerns over supply security.

Russia is the world's second-largest crude producer and a major natural gas provider to Europe.

Energy traders will be awaiting details on the moves to block Russian banks from SWIFT to see if the sanctions will dramatically impact oil and gas flows. Still, the measures will likely discourage many buyers from purchasing Russian crude.