Even higher gas and food prices. Turbulence in the stock markets. And a slower return to economic normalcy.
Russia's invasion of Ukraine on Thursday will send ripple effects across the American economy — and into the wallets of Minnesotans — just when the coronavirus pandemic appeared to be loosening its grip on it.
It's too early to know the size and duration of the effects. The Federal Reserve was already on a high wire trying to cool red-hot inflation without throwing the U.S. into recession. War in Europe complicates that work even more.
"Right now, the chances are it's not going to push us into a recession," said Louis Johnston, an economics professor at the College of St. Benedict and St. John's University. "But it's definitely going to slow us down. We're going to get more inflation and less GDP growth than we thought."
The immediate effect was to sharply raise the price of commodities that are common in consumer goods, including oil, corn, soybeans and wheat.
Russia and Ukraine are major agricultural producers and exporters, and Russia is a leading energy producer. While the U.S. imports little from either country, the expected reduction in their output — caused directly by military action and by retaliatory sanctions from the U.S. and other countries — immediately pushed commodity prices higher.
"Even if the U.S. isn't directly shipping oil from Russia, it reduces the total pool of oil," Johnston said, adding that less supply leads to higher prices.
The global benchmark price for crude oil, which had already risen more than $20 a barrel since the beginning of this year, surged above $100 a barrel Thursday morning for the first time since 2014. The price moderated a bit later in the day.
Wheat and soybean prices reached their highest prices since 2012. Corn was near a trading peak reached briefly twice last spring and unseen before that since 2013.
"To some extent that will help farmers in Minnesota, but not in a way they should be happy about," Tim Kehoe, an economics professor at the University of Minnesota, said. "It's just because the world is going a bit crazy."
Stock markets seesawed on Thursday, initially falling but then rallying after President Biden announced new sanctions on Russia. Biden also said he is keeping a close eye on gas prices and will tap strategic reserves as needed to help alleviate the pain at the pump.
Akshay Rao, a marketing professor at the University of Minnesota, said consumers shouldn't be surprised to see gas prices begin going up right away as gas station owners hike prices in anticipation of having to pay more to replenish their current supplies of gas.
Higher gas prices could ripple across the economy, leading to things like increases in airfares. It will also likely lead to higher prices for other goods because of the resulting increased fuels costs to transport items.
"Costs will go up for everything in the grocery store, in your coffee shop. Anything that is shipped now will face an increase in input costs, and that will be reflected in the market price," Rao said.
That will come on top of the steep price increases U.S. consumers have already been grappling with in recent months on everything from meat to natural gas to housing. The consumer price index soared 7.5% in January, the most since the early 1980s, as the strong pandemic recovery led to a supply-demand distortion.
The average price of regular gas in Minnesota on Thursday was $3.42, according to AAA. That was up about 25 cents from a month ago and up about 82 cents from a year ago.
Rao added that the only sort of bright spot he sees is this situation is that it could heighten interest in electrical vehicles, which are less affected by changes in gas prices.
Kehoe said uncertainty resulting from the conflict in Ukraine is not good for the economy.
"The U.S. was in the midst of a fairly strong recovery especially with our job market and GDP," he said. "Our economy was beginning to do well. The uncertainty associated with this is so big that I can't rule out that it really dampens the U.S. economic recovery."
Policymakers at the Federal Reserve planned interest rate hikes starting as soon as next month to help slow inflation. If gas prices do indeed spike even higher as a result of the international conflict, that would keep inflation elevated for longer than officials had hoped. And that could push the Fed to act more aggressively.
"That's going to make it more likely they do either more interest rate increases or the ones they're going to do are going to be bigger," Johnston said.
He also wonders if Russia's invasion of Ukraine will make companies think twice about moving operations into nearby countries such as Poland.
"Before you had Ukraine as a buffer between Poland and Russia," he said. "That's a risk you may not want to take."
In the shorter term, it may also make some Minnesotans rethink travel plans later this year. Instead of Eastern Europe, some may once again look to stay closer to home or to head south to Latin America.