Global stocks fall, oil rises in volatile trading after Russia’s oil ban

NEW YORK (Reuters) – Global stock markets fell on Tuesday as oil prices continued to rally, spurred by the United States’ ban on Russian oil and other energy imports due to Moscow’s invasion of Ukraine.

US President Joe Biden made the announcement on Tuesday, while Britain said it would phase out imports of Russian oil and petroleum products by the end of 2022.

Brent benchmark crude for May rose to an intraday high of $131.27 a barrel before settling at $127.98 a barrel, up 3.9%, while US crude futures settled at $123.70 a barrel, an increase of 3.6%. Read more

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Russia, which ships 7-8 million barrels per day of crude oil and fuel to global markets, has been a target of Western sanctions since its invasion of Ukraine on February 24. Read more

Russia has called its actions a “special operation” and said earlier this week that prices could rise to $300 a barrel and that it could shut down its main gas pipeline to Germany if the West blocks its oil exports. Read more

Jason McMahon, head of geopolitical risk analysis at Morning Consult, called the US ban noteworthy, but said the “real obstacle” would be Europe banning Russian energy imports.

“Given Europe’s relatively high dependence on energy supplies from Russia, such a step, if realized, would have significant economic and geopolitical repercussions,” he said.

The news added to volatility in the markets and fueled fears of rising inflation as the European and other economies slow.

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MSCI World Stock Index (.MIWD00000PUS)which measures stocks in 50 countries, is down 0.8% as of 5:40 pm ET (2250 GMT).

Dow Jones Industrial Average (.DJI) It fell 184.74 points, or 0.56%, the Standard & Poor’s 500 (.SPX) It lost 30.39 points by 0.72% and the Nasdaq Composite Index (nineteenth) It fell 35.41 points, or 0.28%. STOXX 600 Index is down 0.51% (.stoxx).

Solita Marcelli, chief investment officer for the Americas at UBS’s wealth management arm, said the increase in oil prices over the past week – the second largest in 30 years – is likely to continue, causing continued market volatility.

“The Russo-Ukrainian war has driven oil prices up faster than we previously expected, but we still see a tight balance between supply and demand for crude oil globally, even if the hostilities end and the geopolitical risk relationship associated with the crude oil declines,” Marselli said.

Gold held near record levels on Tuesday, after investors took a direct line in the traditional safe metal amid growing concerns about the Russia-Ukraine crisis. Spot gold fell 0.1% to $2,050.97 an ounce.

The London Metal Exchange (LME) halted nickel trading on Tuesday after prices doubled in just hours to a record $100,000 a tonne, spurred by a race to cover short positions. Read more

UBS Global Wealth Management recommended a neutral stance on stocks and advised clients to hold commodities, energy stocks and the US dollar as a short-term portfolio hedge.

The rise in oil and other commodity prices has heightened investor concerns about global inflation. Data this week is expected to show that the US Consumer Price Index rose 7.9% on an annual basis in February, up from 7.5% in January. Read more

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Bloomberg News reported on Tuesday that the European Union plans as soon as this week to issue joint bonds on a potentially massive scale to fund energy and defense spending.

The news pushed both the euro and the yield on US 10-year Treasuries. The euro rebounded from 22-month lows against the dollar, reaching the previous session, and last settled against the dollar at $1.0899. The yield on the 10-year Treasury rose 11.2 basis points to 1.861% after hitting a two-month low on Monday.

The dollar index fell 0.082%.

Investors are carefully watching the European Central Bank’s policy meeting on Thursday. The possibility of stagflation has prompted economists to suggest policy makers delay raising interest rates until late in the year. Read more

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(Reporting by Elizabeth Dilts Marshall) Additional reporting by Saikat Chatterjee, Elizabeth Hoecroft, Sujata Rao and Julie Zhou; Editing by Alexander Smith, Mark Heinrich and Richard Boleyn

Our criteria: Thomson Reuters Trust Principles.

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