NEW DELHI: Global oil and Liquified Natural Gas (LNG) prices are likely to see a sharp rise amid the ongoing border tensions between Russia and Ukraine, Moody's Investors Service said.

Michael Taylor, Managing Director, Moody’s Investors Service, said: “The global price of oil and liquified natural gas (LNG) is likely to rise sharply in the event of a conflict, which will be positive for the relatively few exporters in the Asia Pacific region and negative for the substantially greater number of net energy importers. However, a mitigating factor is that several Asian economies have long-term supply contracts in place for LNG which will limit the impact of fluctuations in the spot price.”

He further said that trade effects are likely to arise from import diversion and diversification, although there may be opportunities for commodities producers in Central Asia to increase supply to China.  Supply chain bottlenecks would also be aggravated, adding to inflation pressures in the region, he added. 

Financial market effects will have the largest near-term impact: for example, if a conflict gives rise to widespread risk aversion, funding conditions for high yield issuers, some of which are already experiencing constrained access to finance due to other factors, will deteriorate further. Chinese property developers would be particularly exposed to this risk given their large upcoming offshore debt maturities, although it is likely to apply to some degree to most high-yield issuers in the region; Moody’s Investors Service said.