RyanAir & Belarus: What Does It Mean For The Markets?

gray and white airplane on flight near clear blue sky

Image Source: Unsplash

Like all geopolitical incidents, even mentioning the facts of the case is likely to incite controversy.

But geopolitical incidents have a strong potential to snowball and affect the markets. Or, if they don’t snowball, the concern for escalation that doesn’t materialize ends up affecting the markets anyway.

So what should traders be mindful of while the incident winds its way through the news cycle?

Relations between the EU and Belarus were already frigid following the disputed elections last year. We can certainly expect the incident to ratchet up tensions. In fact, the EU has already indicated further sanctions against Belarus.

However, Belarus is integrated into the CIS and has relatively little trade with the EU. Therefore, trade disputes with Belarus are unlikely to have an impact on the markets.

Except for one important exception.

What about the pipeline?

Russia is the largest supplier of crude oil to Europe. In fact, the largest shipments go through the Druzhba pipeline which crosses Belarus.

This pipeline was already a focus last year when Lukashenko accused Russia of not supplying enough fuel. At the time, he threatened to cut off fuel deliveries through this pipeline.

The potential worry is that, should tensions escalate, the pipeline could be a “nuclear option” for Belarus. Of course, the country also depends on its own supply of oil from the pipeline.

Therefore, it’s very, very unlikely to suffer any disruptions. However, the concern over the incident could put some pressure on European fuel prices.

It’s not good for risk sentiment

Generally, geopolitical uncertainty weighs disproportionately on risk sentiment This could be an added problem given the somewhat shaky recovery in Europe.

That an airplane was forced to deviate from its flight path certainly doesn’t help return fliers to the sky. In fact, there have been some suggestions that European airlines would avoid flying over Belarusian airspace from now on. The latest snapshots from flight radar show that airplanes still fly over Belarus, but they are cargo or belong to Russian airlines.

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