Iceland has not been immune to the economic effects of the Russian invasion of Ukraine. Gasoline prices rose to ISK 303 ($2.27; €2.06) per litre around the country this morning, while diesel prices also surpassed ISK 300 per litre. Nasdaq Iceland’s index has dropped 12% since the invasion began, with the value of Icelandair stocks dropping by 32%. This drop has entirely erased the stock exchange’s steady gains over the past year.
Nasdaq Iceland’s selected share index hit a low in March 2020 at the beginning of the COVID-19 pandemic. It rose gradually from that date, until reaching a high point last September, RÚV reports. The day the Russian invasion began, the selected share index dropped by 6%. The stock index remains significantly higher than it was in March 2020, but its gains over the past year have been fully erased.
Íslandsbánki’s Chief Economist Jón Bjarki Bentsson outlined the three main factors causing stock prices to fall in Iceland. Firstly, the uncertainty created by the Russian invasion of Ukraine has pushed investors to opt for less volatile assets. Secondly, rising energy and raw material prices impact the operations of companies that depend on those resources. Thirdly, the uncertain economic outlook on a global level may impact how well Iceland’s tourism industry bounces back from the pandemic and how many people travel to Iceland in the near future. This last factor impacts companies such as Icelandair significantly.
Rúnólfur Ólafsson, CEO of the Icelandic Automobile Association, has pointed out that rising gas prices impact often impact those who are the most disadvantaged, as well as impacting the cost of transporting goods and the cost of snow removal for municipalities. He called on the government to temporarily lower taxes on gasoline in order to mitigate the impact.
