Russia’s invasion of Ukraine has raised fears of a disruption in oil and gas supplies to Europe, sending prices to new highs. Brent crude futures hit $105 a barrel immediately after the news broke before falling back; Natural gas prices in Europe jumped 25%.

Coming at a time when supplies are already tight, the dispute is expected to keep upward pressure on prices unless it becomes clear that Russian exports will not be halted. The impact will be felt directly by US consumers and others, and it will further contribute to already high inflation.

Escalating tension around Ukraine had driven prices up even before the invasion. Fears that Russian natural gas exports via Ukraine were under threat have been a major factor driving record prices in Europe, which depends on Russia for more than 40% of its natural gas imports. Ukraine had less impact on oil prices, but with demand growth outpacing supply growth, markets are wary.

Yet the Russian invasion of Ukraine has not (yet) led to an immediate disruption of oil or natural gas supplies. Russian oil trade has temporarily slowed in anticipation of US and EU sanctions, but since the first US and EU measures put in place were not aimed at energy, crude sales are expected to return to normal.

Natural gas supplies are more vulnerable given that around 20% of Russian gas exports outside the countries of the former Soviet Union pass through Ukraine. Risk of pipeline damage will increase as fighting escalates, and Russia may seek to deny transit fees to Ukraine by declaring force majeure to eliminate Russia’s liability over gas shipments by this road. Such a move by Russia would have the added benefit of also hitting EU finances by increasing the cost of alternative supplies for the bloc.

In the longer term, the risk to energy supplies will depend on two factors.

The first is whether tougher sanctions are imposed by the US and EU. Deeper and broader sanctions are certainly possible, especially if Russia seeks to occupy all or part of Ukraine. American and European officials insisted before the invasion that they would seek to avoid measures that directly target Russian energy flows, particularly because of the damage to their own economies.

But the harsher the financial sanctions imposed and the greater the number of Russian banks targeted, the greater the risk that Western companies will be reluctant to do business with these financial institutions. This hesitation could derail deals in the energy and other sectors. At the very least, the requirement to comply with sanctions will make Western banks more reluctant to deal with their Russian counterparts.

Oil trades will likely be affected first, as this trade is largely short-term. But, over time, long-term gas contracts will also be affected.

The second factor is whether Russia is responding to the sanctions by deploying its own “energy weapon”: cutting off oil and gas exports to Europe. He has not threatened such measures so far; on the contrary, the Russian government and companies strove to emphasize their reliability as energy providers just before the invasion and increased natural gas flows following the military operations. To back down now would destroy their credibility in the markets and incur huge financial and business costs.

Energy is a major source of revenue for the Kremlin, with oil and natural gas accounting for 40% of its budget revenue. For big companies such as Gazprom, breaking long-term contracts with the EU risks major legal liability and would further accelerate the bloc’s moves to decouple from its dependence on Russian gas.

On the oil side, the interruption of physical supplies would force Russian companies to give up market share. If that happened, other producers — especially OPEC leaders such as Saudi Arabia — would face increasing pressure to use their own spare capacity to fill the Russian supply gap.

Nevertheless, the invasion of Ukraine demonstrates that Russian President Vladimir Putin is ready to take big bets. Therefore, the possibility of a total suspension of oil and natural gas exports to the EU cannot be ruled out. If this were to happen, the impact would be devastating, not only for European economies dependent on Russian imports, but also for the wider global economy.

Cutting off all natural gas exports to Europe would lead to massive power shortages and exorbitant prices that would drag the EU and UK economies into long-term recessions. Meanwhile, a suspension of Russian oil exports to Europe would immediately push world prices well above $100 a barrel and further boost global inflation.

It would be a Pyrrhic victory for Russia at best, given the probable long-term strategic and energetic return. But in his current mood, Putin may not care.

Raad Alkadiri is Managing Director of Energy, Climate and Resources at Eurasia Group.