Oil prices jump, stocks fall as Ukraine crisis escalates
Oil prices jumped nearly 5% and stock prices fell after Russian President Vladimir Putin recognized the independence of rebel-held parts of Ukraine, raising fears of a full-scale invasion.
Russia is a major energy producer and tensions around Ukraine have led to wild swings in volatile energy prices, in addition to the inevitable risks of a wider conflict.
Oil prices had already recently hit their highest level since 2014. As of Tuesday morning, the advance in US benchmark crude oil had slowed slightly. It rose about $3, or 3.5%, to around $94 a barrel in electronic trading on the New York Mercantile Exchange. The price of Brent crude, the standard for international oils, gained around $4.50, or nearly 5%, to around $98 a barrel.
U.S. trade was closed Monday for Presidents Day, but European and Asian markets shook as Putin worked to secure Russia’s hold on rebel Ukrainian regions, adding to fears of a large-scale invasion. ladder.
These actions have undermined hopes of averting a conflict that could cause mass casualties, power shortages on the continent and economic chaos around the world.
The United States and the European Union condemned Russia and prepared to retaliate with sanctions. On Tuesday, Germany suspended the approval process for the Nord Stream 2 gas pipeline that would bring Russian natural gas to Europe. Western powers fear Russia is using skirmishes in Ukraine’s eastern regions as a pretext to attack democracy, which has defied Moscow’s attempts to bring it back into its orbit.
Putin received no support from members of the UN Security Council during an emergency meeting on Monday night for his actions to bring separatists in eastern Ukraine under Moscow’s control.
US futures were down, with the contract for the S&P 500 down 0.1% and the futures contract for the Dow Industrials 0.2% lower.
The biggest losses were recorded in Russia, where the MOEX index fell 5% on Tuesday after losing nearly 11% on Monday.
The ruble was 2.5% lower.
“The current situation is tightening financial conditions for Russian companies, destabilizing markets and reducing business predictability,” FxPro’s Elena Nazarova said in a commentary.
But Britain’s FTSE 100 rose around 0.35% to 7,510.59, while Germany’s DAX edged higher to 14,743.53 and Paris’ CAC 40 was flat at 6,788.13.
In Asia, Tokyo’s Nikkei 225 fell 1.7% to 26,449.61 while the Hang Seng in Hong Kong regained lost ground to close 2.7% lower at 23,520.00. South Korea’s Kospi fell 1.4% to 2,706.79 and the Shanghai Composite Index fell 1% to 3,457.15. Australia’s S&P/ASX 200 fell 1% to 7,161.30.
The turmoil in Ukraine has heightened uncertainty at a time when investors are already worried about how the world’s central banks, particularly the US Federal Reserve, will act to counter soaring inflation as coronavirus outbreaks coronaviruses fueled by the highly contagious omicron variant are clouding the outlook for many countries.
“Indeed, a full-scale invasion of Ukraine by Russia will leave many central banks in the lurch,” Oanda’s Jeffrey Halley said in a report.
The rise in oil prices complicates this situation.
Many Asian economies are dependent on oil and gas imports, and even if these do not come from Russia, the ripple effects in global markets will increase energy costs at a time when countries are still recovering. barely from the pandemic.
“Essentially, while Russia may not be the primary source of direct energy imports for (emerging markets) Asia, its weight as a global producer/exporter means that energy shocks emanating from Russian supply disruptions will nonetheless be disproportionately large,” Mizuho Bank said. Vishnu Varathan said in a statement.
“So the Ukrainian risks are substantial one way or another,” he said.
Russia exports coal to India and Vietnam and is South Korea’s fourth-largest oil supplier, Varathan said.
On other fronts, Treasury yields fell as investors shifted money to the safety of US bonds. The 10-year Treasury yield, which affects rates on mortgages and other consumer loans, was 1.90% early Tuesday, down from 1.93% on Monday.
In currency trading, the US dollar rose to 114.80 Japanese yen from 114.74 yen on Monday night. The euro fell from $1.1312 to $1.1317.
US stocks closed a week of volatile trading with a large selloff on Friday.
The S&P 500 and the Dow Jones Industrial Average both fell 0.7%. The Nasdaq composite bore the brunt of the selloff, slipping 1.2%. Small company stocks also fell, with the Russell 2000 Index down 0.9%.