Global stocks fall, oil rises in volatile trading after Russia’s oil ban

Global stock markets fell on Tuesday as oil prices climbed further, pushed by the United States’ ban on Russian oil and other energy imports following the invasion of Ukraine by Moscow.

US President Joe Biden made the announcement on Tuesday, while Britain said it would phase out imports of Russian oil and petroleum products by the end of 2022.

Benchmark Brent crude for May hit an intraday high of $131.27 a barrel before settling at $127.98 a barrel, up 3.9%, while U.S. crude futures settled at $123.70 a barrel, an increase of 3.6%.

Russia, which ships 7 to 8 million barrels a day of crude and fuel to world markets, has been the target of Western sanctions since its February 24 invasion of Ukraine.

Russia calls its actions a ‘special operation’ and said earlier this week that prices could soar to $300 a barrel and that it could close the main gas pipeline to Germany if the West blocks its oil exports .

Jason McMann, head of geopolitical risk analysis at Morning Consult, called the US ban remarkable, but said the “real show” would be Europe’s ban on Russian energy imports.

“Given Europe’s relatively high dependence on energy supplies from Russia, such a move, if materialized, would have major economic and geopolitical ramifications,” he said.

The news added to market volatility and stoked fears of rising inflation as European and other economies cooled.

The MSCI World Equity Index, which tracks stocks from 50 countries, fell 0.8% at 5:40 p.m. ET (2250 GMT).

The Dow Jones Industrial Average fell 184.74 points, or 0.56%, the S&P 500 lost 30.39 points, or 0.72% and the Nasdaq Composite fell 35.41 points, or 0.28 %. The STOXX 600 was down 0.51%.

Solita Marcelli, director of investments in the Americas for UBS’s wealth management arm, said the rise in oil prices over the past week – the second biggest jump in 30 years – is expected to continue, resulting in continued market volatility.

“The Russian-Ukrainian war has pushed oil prices up faster than expected, but we continue to see a tight supply-demand balance for crude oil around the world, even as hostilities end and the geopolitical risk premium attached to crude is diminishing,” Marcelli said. noted.

Gold hit record highs on Tuesday, after investors flocked to the traditional safe-haven metal amid growing fears over the Russia-Ukraine crisis. Spot gold fell 0.1% to US$2,050.97 an ounce.

The London Metal Exchange (LME) halted nickel trading on Tuesday after prices doubled in hours to a record $100,000 a tonne, fueled by a race to cover short positions.

UBS Global Wealth Management recommended a neutral stance on equities and advised clients to hold commodities, energy stocks and the US dollar as short-term portfolio hedges.

The rally in oil and other commodities has heightened investor fears about global inflation. Data this week is expected to show that the US consumer price index climbed 7.9% year on year in February, from 7.5% in January.

Bloomberg News reported on Tuesday that the European Union plans as early as this week to jointly issue bonds on a potentially massive scale to fund energy and defense spending.

The news sent both the euro and the yield on benchmark 10-year US Treasuries higher. The euro rebounded from a 22-month low against the dollar, which it hit in the previous session, and was flat against the dollar at US$1.0899. The yield on 10-year Treasury bills rose 11.2 basis points to 1.861% after hitting a two-month low on Monday.

The dollar index fell 0.082%.

Investors are closely watching a European Central Bank policy meeting on Thursday. The prospect of stagflation has prompted economists to suggest that policymakers could delay rate hikes until the end of the year.

(Reuters)

Garland K. Long