Stocks tumbled, commodity prices surged and the euro sank after the US said it was discussing a ban on oil imports from Russia and investors digested the threat of a protracted escalation in energy prices.
Equity markets in Asia started the week sharply lower. Hong Kong’s Hang Seng led with a fall of 3.3 per cent, on track for its lowest close since the beginning of the pandemic. China’s CSI 300 fell 2.4 per cent and Japan’s Topix index shed 3.2 per cent.
Futures also pointed to sharp falls for European equities, with the Euro Stoxx 50 tipped to slide about 3 per cent and the FTSE 100 expected to fall 2.7 per cent. The S&P 500 was set to dip 1.4 per cent when trading begins on Wall Street later in the day.
The ructions in global stocks came as international benchmark Brent rose almost 18 per cent to $ 139.13 a barrel in early trading on Monday, its highest level since 2008, before paring gains to be up more than 8 per cent at $ 128.12. US marker West Texas Intermediate was up 7.4 per cent at $ 124.25.
The surge in oil prices came after US Secretary of State Antony Blinken said Washington was in “very active discussions” with European allies. Nancy Pelosi, US House Speaker, said Congress was “exploring” legislation to ban the import of Russian oil.
“The world is very unprepared for this shock,” said Robert Rennie, global head of market strategy at Westpac. He said it was unclear if a US ban would cover only oil or all Russian energy imports, but said the latter would have a “catastrophic impact” on energy prices.
The prospect of expanded sanctions hitting Russian oil shipments jolted global commodity markets. European natural gas futures closed Friday’s session up more than 170 per cent for the year to date.
Along with crude, many commodities including natural gas, palm oil and nickel have hit multiyear highs since the outbreak of war. Palladium, a key component of catalytic converters in cars, jumped as much as 5.3 per cent to a record high of $ 3,169.46 an ounce.
In Chinese markets, iron ore futures rose as much as 7.6 per cent to Rmb874.50 ($ 138.53) a tonne while nickel rose almost 8 per cent to a record high of Rmb203,140 a tonne.
Traders dumped riskier assets in favor of sovereign debt, pushing yields lower. The yield on the 10-year US Treasury fell 0.04 percentage points to about 1.69 per cent.
Investors also sought safety in the dollar, sparking falls for a host of currencies. The euro fell 0.5 per cent to $ 1.09 while the Australian dollar fell 0.6 per cent to $ 0.74.
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