Oil soars, stocks fall on Russia crude ban talk

Petrol station attendants fill up vehicles at a petrol station in Hong Kong on March 7, 2022 with fuel prices rising as traders fretted over the fallout from Russia’s invasion of Ukraine. (Photo by Peter PARKS / AFP)

LONDON, United Kingdom (AFP) — Stock markets lost ground while metals prices hit record highs and oil surged on Monday after the United States raised the prospect of an embargo on Russian crude — a move on which Europe urged severe caution.

European markets seesawed after a four-percent fall in Hong Kong with Frankfurt losing two percent over the session as London and Paris kept losses in a narrower band.

Wall Street was off just over 1.5 percent two hours into a nervy session as traders monitored the state of talks between the warring parties.

“The catalyst for the overnight fallout were reported that the US and Western allies are considering a ban on Russian oil imports,” said Briefing.com analyst Patrick O’Hare.

The 12th day of conflict brought the third round of talks between the warring neighbours — but Kyiv dismissed an offer from Moscow for humanitarian corridors that would lead refugees from bombarded cities into Russia and Belarus.

“It seems we could be moving to the next stage whereby countries lay down rules to not buy oil and other commodities from Russia which in turn would reduce its funding for the war,” said Russ Mould, investment director at AJ Bell.

US Secretary of State Antony Blinken had said Sunday that the White House and allies were in talks about banning oil imports from Russia following its invasion of Ukraine.

But German Chancellor Olaf Scholz cautioned against banning Russian oil and gas, saying doing so could put Europe’s energy security at risk — a stance reiterated by other European leaders.

“While the US could probably get away with banning oil imports, it is clear that the case for doing so in Europe is a much harder one to make,” said Michael Hewson, chief market analyst at CMC Markets UK.

The benchmark Brent North Sea crude oil contract soared to a near 14-year high as it reached $139.13 before cooling to just under $123.

The record high stands at $147.50, achieved in 2008 during the global financial crisis.

European gas prices, meanwhile, struck record peaks on energy supply fears.

Russia is one of the world’s biggest crude producers and is also a leading supplier of natural gas.

Commodities have been red hot since Russia’s assault on its neighbour, with gold rising above $2,000 an ounce thanks to the metal’s status as a haven investment, before falling back to $1,986.

Aluminium, copper, nickel and palladium prices have all soared too.

“Commodity and energy prices have inevitably been under upward pressure, with escalating sanctions against Russia and the shuttering of some Ukrainian ports driving the search for replacement supplies of crops, metals and energy,” noted Richard Hunter, head of markets at Interactive Investor.

Ukraine, one of the world’s top wheat producers, has set export restrictions on the crop and other agricultural products, the Interfax Ukraine news agency reported.

The move has pushed wheat prices higher as Russia is the world’s top exporter of cereal and Ukraine is the fourth, according to US official estimates.

Stagflation worries 

The surge in prices is handing a headache to central banks, which have already begun removing pandemic-era cash stimulus policies and are raising interest rates to curb inflation that stood at the highest levels in decades even before the invasion.

“The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth to prevent a stagnant environment,” Hunter added.

The International Monetary Fund warned at the weekend that the war and sanctions on Russia would have a “severe impact” on the global economy.

Key figures around 1650 GMT 

New York – Dow: DOWN 1.6 percent at 33,058.32 points

London – FTSE 100: DOWN 0.4 percent at 6,959.48 (close)

Frankfurt – DAX: DOWN 2.0 percent at 12,834.65 (close)

Paris – CAC 40: DOWN 1.3 percent at 5,982.27 (close)

EURO STOXX 50: UP 1.2 percent at 3,512.22

Tokyo – Nikkei 225: DOWN 2.9 percent at 25,221.41 (close)

Hong Kong – Hang Seng Index: DOWN 3.9 percent at 21,045.21 (close)

Shanghai – Composite: DOWN 2.2 percent at 3,372.86 (close)

Brent North Sea crude: UP 3.7 percent at $122.50 per barrel

West Texas Intermediate: UP 2.0 percent at $117.85 per barrel

Euro/dollar: UP at $1.0852 from $1.0850 Friday

Pound/dollar: DOWN at $1.3112 from $1.3200

Euro/pound: UP at 82.79 pence from 82.18 pence

Dollar/yen: UP at 115.45 yen from 114.78 yen

© Agence France-Presse