There have been plenty of factors driving stock market volatility lately, especially the unwinding of Federal Reserve assistance to the economy and the specter of lasting inflation. But in recent weeks a new one has been added — the potential for a conflict in Ukraine. Sanctions related to that conflict could have significant negative impacts on the U.S. economy and drive inflation to new heights.

This past week the prospect of a war in Ukraine drove sickening swings in the market, with losses early in the week as the United States warned of a Russian invasion on Feb 16, a recovery rally as it appeared an invasion would not happen, and then another lurch downward as the White House continues to insist an invasion is likely in the near future.

It’s not surprising that U.S. markets are hyper-responsive to events in Ukraine. The reason isn’t the violence of an invasion, but the prospect of full-scale economic warfare if Russia invades Ukraine and the fallout that will create here at home. Russia is one of the top exporters of natural resources in the world, led by its large exports of oil and gas, but also key agricultural and food-related commodities ranging from wheat to potash (a key component of fertilizers). Ukraine is also a leading exporter of wheat and corn.

The severe economic sanctions contemplated to punish Russia for an invasion, if they worked, would essentially cut Russia off from world markets. By far the most severe consequences would of course be in Russia, but the interruption in Russian and likely Ukrainian exports would also drive prices up across the world, including in the United States.  JP Morgan forecasters recently predicted that a full-scale economic offensive against Russia could “easily” drive up global oil prices by a third, from their current level of $90 a barrel to $120 or more a barrel. According to another recent analysis, a price increase to even $110 a barrel would spike U.S. inflation rates to over 10 percent due to impacts on gasoline prices, heating oil costs, and other expenses. This is before taking into account the effect on food price inflation, which would also be affected.

These effects are no secret. Last Tuesday, President Biden warned that sanctions would not be painless for the American public, and the next day Treasury Secretary Janet Yellen told Agence France Presse that there would be “global fallout” from the sanctions.

Other areas of the world would also be impacted, most prominently our allies in Europe. Russia is the EU’s largest energy supplier, and sanctions would have a significant impact on prices and growth in Europe. This means that if sanctions were put on for an extended period they could strain our European alliances, especially with Western European allies.

 A recent poll by the European Council for Foreign Relations found that majorities in Germany, France, and Italy felt that an economic downturn was too high a price to pay for taking on Russia over Ukraine, with a 38-35 majority in Germany and a 41-31 majority in France agreeing with this perspective. Their governments are far more supportive of the need for sanctions in response to Russian aggression in Ukraine, and indeed are designing potential sanctions measures themselves. But the polling demonstrates the political pressures that will come into play if these measures  lead to an economic downturn.

Inflationary effects would also impact less-developed countries, especially in Africa, where countries are currently facing record rises in food prices, driving poverty, and unrest across the continent. Commenting on potential sanctions-related price spikes, Ophelia Coutts, a consultant at Verisk Maplecroft, stated that “a combination of high food and energy prices will accentuate a cost-of-living crisis and increase the potential for civil unrest in many places, particularly in Africa and the Middle East.”

None of this means that tough sanctions aren’t an appropriate and indeed potentially necessary response if Russia violates international law by proceeding with a full-scale invasion of Ukraine. But it’s clear that these measures, while having by far their greatest impact on Russia and Russian citizens, also impose a significant cost on the world community and on U.S. consumers. Aat a time when many around the world, including in the United States, are struggling with the highest inflation rates in decades, sanctions will make the problem worse.

This underscores the importance of continuing to push for a diplomatic solution to avert a full-scale conflict in Ukraine. By putting issues on the table like NATO expansion, a forceful push to re-start the Minsk peace process in the Donbass, and mutual agreements on more restrained force deployments around Europe, such a solution may still be possible. Even if sanctions are put in place in response to Russian aggression, the costs of holding them on over time means that we should be prepared to lift them in exchange for peace. Sanctions will only be an effective incentive for positive behavior if Russia knows they can be lifted as a reward for constructive actions.