Oil prices soared and Asian shares sank in a day of frantic trading as the risk of a US and European ban on Russian products and delays in Iranian talks sent a wave of panic across world markets.
Russia calls the campaign it launched on February 24 a “special military operation,” saying it has no plans to occupy Ukraine but that hasn’t convinced the markets and having surged 18% in wild early action, Brent was last quoted $9.95 higher at $128.06, while US crude rose $8.35 to $124.03.
The benchmark Nikkei 225 index dropped 2.94%, or 764.06 points to end at 25,221.41, its lowest close since November 2020. The broader Topix index fell 2.76%, or 50.91 points, to 1,794.03.
The MSCI’s broadest index of Asia-Pacific shares outside Japan lost 2.4%. Chinese blue chips shed 2.3% amid a sea of red across Asian markets.
Also on AF: China ‘Confident’ It Can Ensure Energy Supply Despite Hurdles
The Hang Seng Index dropped 3.87%, or 847.66 points, to 21,057.63. The Shanghai Composite Index dipped 2.17%, or 74.79 points, to 3,372.86, while the Shenzhen Composite Index on China’s second exchange dropped 2.70%, or 61.23 points, to 2,203.41.
That jump will act as a tax on consumers and the potential blow to global economic growth saw S&P 500 stock futures drop 1.3%, while Nasdaq futures shed 1.7%. US 10-year bond yields also dropped to their lowest since early January.
EUROSTOXX 50 futures dived 3.0% and FTSE futures 2.7%.
Having climbed 21% last week, Brent crude was further energised by the risk of a ban of Russian oil by the United States and Europe.
“If the West cuts off most of Russia’s energy exports it would be a major shock to global markets,” BofA chief economist Ethan Harris said.
He estimates the loss of Russia’s 5 million barrels could see oil prices double to $200 a barrel and lower economic growth globally.
Nickel, Aluminium, Zinc, Copper Soar
And it is not just oil, with commodity prices having their strongest start to any year since 1915, BofA said. Among the many movers last week, nickel rose 19%, aluminium 15%, zinc 12%, and copper 8%, while wheat futures surged 60% and corn 15%.
That will only add to the global inflationary pulse with US consumer price data this week expected to show annual growth at a stratospheric 7.9%, and the core measure at 6.4%.
Fed fund futures were also gaining as the market priced in a slower pace of rate rises from the Federal Reserve this year, though a March hike is still seen as a done deal.
The dollar was broadly firm, supported in part by a strong payrolls report that only reaffirmed market expectations for a Fed hike this month. The dollar index was last at 99.134 having climbed 2.3% last week.
Gold benefitted from its status as one of the oldest of safe harbours and was last up 1.1% at $1,991 an ounce.
Key market figures
Brent North Sea crude > UP 9.3% at $129.05 per barrel
West Texas Intermediate > UP 8.5% at $125.5 per barrel
Tokyo > Nikkei 225: DOWN 2.9% at 25,221.41 (close)
Hong Kong > Hang Seng Index: DOWN 3.9% at 21,045.21 (close)
Shanghai > Composite: DOWN 2.2% at 3,372.86 (close)
London > FTSE 100: DOWN 1.82% at 6,859.68
New York Dow > DOWN 0.5% at 33,614.80 (Friday close)
- Reuters with additional editing by Sean O’Meara
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