Brent crude oil topped $103 a barrel, European stocks fell sharply and shares in Moscow dropped 45 per cent after Russia’s President Vladimir Putin launched a military invasion of Ukraine.
The regional Stoxx Europe 600 share index lost 2.8 per cent in early trades, taking it through a technical correction, defined as a 10 per cent decline from a recent peak. Germany’s Xetra Dax fell 3.7 per cent, with similar falls across most European bourses.
Brent crude rose as much as 7.2 per cent to $103.78, the first time the international benchmark has crossed the $100 threshold since 2014. In Amsterdam, front month natural gas futures soared 28 per cent to €114 per megawatt hours.
Meanwhile, traders piled into government bonds to shelter from volatility in riskier asset classes and the spot gold price hit a 13-month high of almost $1,949 per troy ounce.
The escalation of the conflict in Ukraine is dominating the global market narrative because of the potential for sanctions to cut Russia’s energy and resources out of global supply chains, causing price shocks.
“A situation which seriously chokes off energy supplies from Russia will affect the world as a negative supply shock,” said Sunil Krishnan, head of multi-asset funds at Aviva Investors.
“Some of that [effect] will be through inflation and some [will be] through a chilling impact on growth. We need to watch the euro area most closely in that regard, but it will also affect the US.”
“If this situation continues to deteriorate I wouldn’t be surprised to see Brent at $120 a barrel, and that is really the point you’d expect to see co-ordinated intervention [by global suppliers],” said Robert Rennie, global head of market strategy at Westpac.
As explosions were reported near Kyiv early on Thursday morning, the Moscow Exchange suspended all trading. When trading resumed hours later, the benchmark Moex index plummeted as much as 45 per cent, taking its loss so far this year to 56 per cent in local currency terms.
The rouble weakened to almost 90 per dollar, a record low against the US currency, while London-listed shares of Russian businesses plunged. Miner Evraz fell more than a quarter and oil and gas producer Gazprom dropped more than two-fifths.
Futures markets indicated that the US’s S&P 500 was set to lose 1.8 per cent after closing Wednesday’s session sharply lower, while the tech-focused Nasdaq 100 was projected to fall 2.3 per cent.
In Asia, Hong Kong’s benchmark Hang Seng index fell more than 3 per cent, while China’s CSI 300 shed 2 per cent and Japan’s Topix closed 1.3 per cent lower on Thursday.
The yield on 10-year US Treasuries fell 0.08 percentage points to 1.9 per cent as the benchmark government debt instrument rose in price.
The euro fell 0.6 per cent against the dollar to $1.124.
The market moves came after Putin ordered a full-scale military invasion of Ukraine that has been condemned by the US and many other European and western governments.
“All responsibility for the possible bloodshed will be fully and completely on the conscience of the ruling regime,” the Russian president said in an address broadcast on state television.
G7 leaders are to hold a virtual summit on Thursday morning. Transatlantic alliance Nato called an emergency meeting of its top decision-making body ahead of an emergency summit of EU leaders in the evening.
Additional reporting by Leo Lewis in Tokyo
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