Oil prices soared on Monday to more than $139 a barrel after the US said it was in “active discussions” to ban Russian crude imports, while the threat of an economic shock in Europe dragged down stocks and the euro.
The jump in Brent crude, the international oil benchmark, marked an almost 20 per cent rise from its settlement price on Friday, taking it to its highest level since the 2008 financial crisis.
European wholesale natural gas prices also shot higher, with futures jumping to a new record of €345 a megawatt hour, from about €193 on Friday — a rise of almost four-fifths. A year ago, the price stood at about €16. Both rallies later moderated but investors say the rapid ascent of oil and gas prices poses particularly severe risks to the European economy.
“Global oil markets are in the throes of the biggest crisis for decades,” said Ehsan Khoman, head of emerging markets research for Emea at MUFG. “Oil’s rally will accelerate inflation, rates will go much higher, financial conditions will tighten significantly, consumers will be squeezed and corporate activity will be jolted. Recessionary territory is on the horizon.”
The shifts in energy markets came after Antony Blinken, US secretary of state, said Washington was in “very active discussions” with European allies over an oil ban following Russia’s invasion of Ukraine.
Europe’s regional Stoxx 600 share index, which last week dropped 7 per cent in its worst performance since March 2020, had lost a further 0.9 per cent by Monday afternoon in London.
“Basically, the further away a company is geographically from Ukraine, the better,” said Marcus Poppe, co-fund manager of DWS Top Dividende.
Fears of sanctions — and the ensuing effect on already record-high levels of inflation in the eurozone — had jolted equity investors, analysts said.
“While the market had assumed sanctions would be somewhat toothless, we now see the US administration will go to some lengths to punish Russia,” said Altaf Kassam, head of European investment strategy at State Street Global Advisors.
“It’s going to be hard for central banks to do what they have conventionally done, which is cut rates to backstop the market,” Kassam said.
Futures contracts tracking both Wall Street’s S&P 500 and the technology-heavy Nasdaq 100 dropped about 0.7 per cent, after heavy losses for Asian equities earlier in the day.
Asked about Blinken’s comments, a senior French official said further sanctions were being examined by European and “other” partners, without detailing how advanced the discussions were.
“The question today is to see how we can resort to strategic reserves to stop prices from spiralling even further on oil and gas markets, and also, in the longer term, how we manage our stocks and our supplies,” the official said.
British officials are not ruling out a total ban on Russian oil imports but one described the idea as “a drastic move”. Liz Truss, UK foreign secretary, has asked officials to explore a “ceiling” on Russian energy imports that would fall over time, mitigating the likely economic shock.
In Europe, Germany’s Xetra Dax fell 1.8 per cent, while Spain’s Ibex share index lost 1.3 per cent. The Stoxx sub-index of European bank shares dropped 3.2 per cent and is down by more than a quarter since the week ending February 18. London’s FTSE 100 fell 0.2 per cent.
The yield on Italy’s 10-year bond rose 0.08 percentage points to 1.6 per cent as the debt instrument fell in price to reflect concerns about slowing eurozone growth reducing the fiscal support available for its financially weaker nations.
In currencies, the dollar index, which measures the US currency against six others, hit its highest point since May 2020. The euro fell 0.3 per cent to $1.09, also its weakest level against the dollar since May 2020. The rouble weakened to as much as Rbs138.5 against the dollar, marking a record low for the Russian currency.
The spot gold price breached $2,000 for the first time since August 2020 in Asian trading as investors sought shelter from market risk in the haven asset.
Palladium, a key component of catalytic converters in cars, jumped 9 per cent to more than $3,280 an ounce. Wheat futures rose 7 per cent to $12.94 a bushel.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzE5Y2UwNTJlLTliODgtNDYwYi1iZjI2LTlkMzg0NTA0MTNiMdIBAA?oc=5
2022-03-07 13:25:51Z
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