Cascading socio-economic and financial impacts of the Russia-Ukraine conflict

Disruptions in global food and energy trade can trigger cascading socio-economic losses. Financial markets can amplify such losses and generate systemic cross- sectoral effects, e.g. on food insecurity. Our novel methodology links the real economy and financial markets to quantify such cascading losses and to capture amplification effects by financial markets. We study the Russia-Ukraine conflict and find large, regionally and sectorally heterogeneous cascading impacts. Com- paring with real data confirms that our approach captures several key impacts of the crisis: the energy price increase in Europe, the strong reaction of European commodity future markets with large benefits for fossil companies (equity values up to +54%) and losses for companies most exposed to the belligerents (up to -6%), and the worsening of food affordability especially in Sub-Saharan Africa, Asia, and Latin America (additionally 10 million people at risk of hunger). Our analysis shows the importance of accounting for cascading risks and amplification effects to strengthen economic, financial, and food system resilience.