Oil surpasses $113 per barrel, but markets plummet on worries about the Ukraine conflict.
Hong KongCrude oil prices soared above $113 a barrel Wednesday, while stocks fell as investors became more concerned about the Ukraine war’s implications on global energy supply and the economic recovery.
Over the last week, Russian President Vladimir Putin has invaded his neighbor, which has sent international markets into a tailspin. This has made nerves on trading floors even more frayed by rising inflation and tighter central bank monetary policies.
Many countries have slammed Russia with a series of wide-ranging sanctions that have isolated it and threatened to shut down its economy.
Markets have been thrown into chaos as a result of the measures, with the supply of critical commodities such as metals and cereals surging. Global staple wheat prices are at a 14-year high, having increased 30% in the last month.
However, the primary cause of concern on the trading floors is crude oil, which has soared in price since Russia started planning for an invasion. Brent surpassed $110 for the first time since 2014 on Wednesday, while WTI followed suit hours later, reaching a 2013 high.
In afternoon Asian trading, Brent reached a high of $113.02, while WTI reached a high of $111.50.
Fears have grown that Russia, the world’s third-largest supplier of the mineral, could be hit with sanctions.
Eastern Europe’s problems come at a time when prices are already high because of limited supplies and a strong rise in global demand as economies reopen after pandemic-induced shutdowns.
Traders will be paying close attention to a meeting later in the day between Opec and other big oil producers, including Russia, to see if they can agree on whether to increase production in order to keep prices from rising too quickly.
President Joe Biden said during his State of the Union speech that the US would join a 30-country accord to release 60 million barrels to assist cool the price increase, while economists have cautioned that such steps would likely have a limited effect.
Because oil prices have risen so much in the last 40 years, this has made inflation even more of a concern. Even as the economy recovers from the pandemic shock, people are having to pay more for things like gas and food.
Ukraine, on the other hand, has given the Fed another problem, which has made it rethink its plans to raise interest rates in order to keep consumer prices in check.
It was generally anticipated to be raised this month and then up to seven times more by the end of the year, but observers believe it will likely tone down its hawkishness in order to avoid undermining the recovery.
“Globally, supply chain concerns and inflationary pressures will be top of mind for many investors,” T. Rowe Price’s Andy McCormick said.
These things are sure to make it even more difficult for central banks to fight inflation.
And Uma Pattarkine of CenterSquare Investment Management told Bloomberg Television, “While the market anticipated up to seven rate rises this year, I believe it will be closer to the three or four we anticipated at the start of this dialogue.”
This week, Federal Reserve Chairman Jerome Powell’s two days of testimony before Congress will be closely watched for clues about what the bank is thinking about.
Tuesday’s Wall Street and European markets went down, and the losses mostly spread to Asia, which had been quiet for two days, but with less severe selling.
Tokyo, Hong Kong, Mumbai, and Manila all fell more than 1%, while Shanghai, Singapore, Taipei, Jakarta, Bangkok, and Wellington all lost 1%. Sydney and Seoul, on the other hand, made small advances.
Paris and Frankfurt opened lower, while London increased slightly.
