The knee-jerk answer to the title question in markets is disruption, and in February 2022 that instinct proved correct.
Russia’s invasion of Ukraine triggered a familiar sequence of a sharp rally in the US dollar, a spike in oil and gas, surging prices for bulk commodities, and an abrupt rotation in equity markets away from growth and toward hard assets. Gold also rallied to record highs early on, which have now been dwarfed. For Australia’s resources sector, the event served as a modern playbook for how geopolitical shocks transmit through currency markets, commodity pricing, and capital flows.
The immediate market reaction followed a well-worn historical script where capital flowed to perceived safety, the US dollar strengthened materially, and liquidity conditions tightened globally. Usually, a surging US dollar acts as a ceiling for commodity prices but in early 2022 the physical realities of supply dislocation asserted themselves with enough force to overwhelm macro headwinds.
Russia was a dominant exporter of energy, fertilisers, nickel, and metallurgical coal, while Ukraine was a vital artery for global food chains. As sanctions and logistics constraints disrupted trade, commodity markets quickly repriced risk.
For Australian producers, the interaction between currency and commodity pricing was critical. While the Australian dollar found some support from the commodity-linked trade, it remained comparatively weaker than the rampant US dollar. This sweet spot of high US-denominated prices converted back into a lower local currency dramatically amplified margins for low-cost operators.
However, this tailwind was eventually challenged by the broader macro-overlay as conflict-driven spikes contributed to global inflationary pressure. This drove up the costs of diesel, explosives, and labour, while prompting tighter monetary policy and higher real interest rates.
The more instructive lessons lie beyond the initial price spike. Within months, markets began to differentiate between temporary dislocation and structural change. While oil and gas prices eventually moderated and agricultural flows were re-routed, policy settings did not revert. Europe accelerated its pivot away from Russian energy, the United States doubled down on domestic industrial policy, and strategic stockpiles regained critical relevance.
For Australia’s resources sector, this policy shift has been the most enduring consequence, as jurisdictional stability has assumed greater weight in capital allocation. Projects offering secure supply of lithium, rare earths, graphite, and high-grade iron ore attracted a “security premium” as Australia’s Tier-1 jurisdiction status became a major selling point.
The post-2022 cycle also illustrated a widening gap in equity markets. While established producers with existing cash flows benefited from the price environment, juniors and developers faced a cost of capital squeeze. As central banks hiked rates to combat inflation, the discount rates applied to future projects rose, creating a divergence between strong underlying commodity narratives and constrained access to equity for emerging explorers.
Looking ahead, it would be simplistic to argue that war is good for resources. Price spikes are often uneven and can destroy demand just as readily as they stimulate investment. What recent history suggests instead is that such events reinforce the strategic importance of reliability.
Australia sits prominently in this cohort with an endowment across LNG, base metals, and critical minerals that positions it as a low risk supplier. However, sustained benefit depends on converting event-driven price strength into long-term productive capacity rather than short-term windfalls.
If the events of 2022 provided a playbook, it’s that markets will initially trade fear, currencies will amplify the move, commodities will reprice to reflect physical scarcity, and policymakers will respond with measures that outlast the headlines.
For Australian miners, developers and explorers, success in that environment relies less on navigating the minefields (pun intended) and more on building strong operations and balance sheets capable of withstanding volatility to supply a world that remains strategically on edge.
