Markets are being driven by the confluence of two epochal developments, both of which have occurred before: an energy shock as major sources of commodity supply are taken out by geopolitical factors; and an energy transition.
The primary case study for the first is the 1973-1974 Arab oil embargo. One lesson from that time is that natural resources markets have always been more vulnerable to supply shocks than investors tend to remember. Another is that sharp and sustained rises in inflation, leading to dramatic shifts in monetary policy and stagflation, emerge as the central scenarios from here.
Of course, no two commodity supply shocks are the same. The distinctive characteristics of this one include the complex ethical and humanitarian considerations around sourcing energy from Russia, and the degree of self-sanctioning by private companies. Whether shut off by the public or private sectors, the removal of Russian energy supply will have profound implications for prices of oil, gas and coal.
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The second, concurrent development is the energy transition, in this case from hydrocarbons to clean power. We have been here before, too - in the transition from wood to coal from the mid-19th century, and the transition from coal to oil and gas that began 50 or so years later. These previous shifts show that energy transitions take many decades, during which new energy sources overlap with existing ones.
This is where we are today. Despite the tremendous growth in renewables over the last decade, the global energy system is still overwhelmingly reliant on fossil fuels.
Indeed, the acceleration towards renewables has to some extent masked Europe's reliance on Russia as an energy supplier, a state of affairs exacerbated by some questionable policy decisions since 2010. Spikes in the prices of hydrocarbons can be expected as the world attempts to move away from them - particularly if there is underinvestment in supply before demand has peaked, as is the case today.
A defining element of this energy transition is the urgent need to tackle climate change, which could make this transition faster than the previous two. Another is the demand implications for a range of metals and materials.
Transitioning away from hydrocarbon-based energy requires vast quantities of copper, nickel, zinc, lithium, aluminium, steel and other commodities, for purposes including electrification, producing batteries and electric vehicles, and renewable-energy installation.
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Recent price action highlights how reliant the world is on Russia for a number of these transition materials. We expect many of them to find a way to market, but the current crisis is an uncomfortable reminder of the correlation between mineral wealth and geopolitical instability.
So how will the global energy system to recalibrate following Russia's invasion of Ukraine?
We expect the move towards renewables to accelerate - partly because inflated hydrocarbon prices make clean-energy sources even more economically attractive in the long-term, and also because energy security augments the urgency of addressing climate change.
In the near term, demand for thermal coal for power generation will likely increase in both Europe and Asia. Europe will become the first port of call for spot liquefied natural gas cargoes, where the ‘Russia risk premium' is likely to be maintained for many years; less global natural gas will go to Asia.
Oil prices will remain extremely volatile. Nuclear power is back on the table, but unlikely to provide any relief in this decade.
Finally, an acceleration of the energy transition has major implications for transition metals such as copper.
The path forward from here will not be smooth. For one thing, in Europe, the budgetary implications of accelerating investment in renewable energy infrastructure against a backdrop of rising interest rates and increased defence spending are extremely challenging.
But although markets may appear to be in disarray, investors should remember that they are being driven by powerful trends that will shape investment outcomes for years to come.