A growing mass of Russian troops on Ukraine’s border, escalating rhetoric, and dire warnings by military analysts all point to one thing: Ukraine is on the brink of a war that could dwarf 2014’s fighting in size and bloodshed. 

The threat of a Russian invasion of Ukraine has already pushed Russian stocks lower, though its impact on global stocks and commodities is not what one might expect. Here’s how a war would affect your portfolio – and how it wouldn’t.

Crude math

Oil prices have been on a tear, although so far it’s hard to tell whether the situation in Ukraine has anything to do with it. Demand is picking up as concerns over the omicron virus variant fade, while OPEC+ members are sticking to modest step-by-step output hikes.  

If war actually breaks out, it will certainly show up in crude prices. Morningstar strategist Allen Good says the additional geopolitical risk premium, combined with existing drivers, could push crude towards $100.

“Western sanctions could lead to a re-rating for geopolitical risk, even if there aren’t any tangible supply and demand issues—which there probably won’t be,” he says.

Western energy stocks

The return of a geopolitical risk premium is bullish for global oil producers. Western oil majors have little exposure to Russian oil production, and few physical assets at risk.

Sanctions against Russian producers would benefit European and US firms, meanwhile, and especially those most focused on crude oil. US behemoths Chevron (CVX), Exxon (XOM) and ConocoPhillips (COP) stand to rise ahead of more diversified European peers such as Shell (RDSB), BP (BP) or Total (TTE).

Could higher oil prices spark a revival in Australian energy stocks? The government is spruiking Australian LNG as a solution for Europeans concerned about Russian gas.

Trade Minister Dan Tehan said Thursday geopolitical events in Europe could be a boon for local exporters. He also said Australian LNG exporters could meet demand from "friends and allies" in Europe. 

Higher oil prices are lending a helping hand regardless. The local oil and gas sector has avoided the declines plaguing the broader market, with the S&P/ASX 200 Energy Index up 1.6% versus a 9.9% fall for the benchmark index.

Majors Santos (ASX: STO) and Woodside Petroleum (ASX: WPL) are up 5% and 9% this year.

Russian stocks in the line of fire

This one’s straightforward. Vulnerable to Western sanctions, and with their physical assets in the line of fire, stocks close to the conflict have been in retreat. Russia’s MOEX stock benchmark is down 20% from early November, when Russia began its second buildup of troops near the border.

Among the biggest decliners are Russia’s banks, which now risk exclusion from global capital markets if relations with Western nations break down. Sberbank (SBRCY), Russia’s largest, has slumped 40% since early November.

Russian energy producers, meanwhile, have outperformed the MOEX benchmark as rising commodity prices offset geopolitical risk—Gazprom (OGZPY) and Rosneft (ROSN) are each down about 15% during the period.