Oil surges, world stocks tumble amid fears of war between Russia and Ukraine

Crude oil futures rose on Monday to their highest levels since 2014 on supply concerns while Wall Street equities fell a day after Russian President Vladimir Putin ordered troops into the Donetsk and Luhansk regions of Ukraine.

While investors braced for volatility as they watched for international responses and Putin's next move, the safe haven U.S. dollar actually lost some ground and European stocks turned positive, while U.S. Treasury yields were rising after the Kremlin said it remained open to diplomacy.

European countries started to announce sanctions against Russia, with German Chancellor Olaf Scholz warning the Nord Stream 2 gas pipeline would now be denied certification to begin operating and Britain taking action against Russian banks. U.S. President Joe Biden was due to deliver remarks on the situation at 1300 (1800 GMT). 

Europe's STOXX 600 index was essentially flat after falling just under 2% earlier in the day and losing 1.3% on Monday when U.S. markets were closed for a holiday.

“The bottom line is that fear factor remains elevated and until we get some sort of a clearer picture of what Putin may or may not do, the market is just going to stay in a state of confusion,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

And rising oil prices added to the uncertainty as investors worried about the implications for Federal Reserve policy changes aimed at combatting high inflation.

“If oil prices continue to rise and go above $100 and stay there for sustained period of time that means you're going to have even higher inflation,” he said.

Brent crude was last at $97.03, up 1.72% on the day, after earlier topping $99 for its highest level since September 2014, reflecting fears that Russia's energy exports could be disrupted by any conflict. U.S. West Texas Intermediate (WTI) crude was last up 2.04% to $92.93 per barrel after earlier hitting $96, its highest level since August 2014.

The Dow Jones Industrial Average fell 270.99 points, or 0.8%, to 33,808.19, the S&P 500 lost 23.46 points, or 0.54%, to 4,325.41 and the Nasdaq Composite dropped 128.84 points, or 0.95%, to 13,419.23.

The MSCI world equity index, which tracks shares in 50 countries, was last down 0.6% after earlier falling 0.8%, with the index at levels not seen since Jan. 28.

MSCI's broadest index of Asia Pacific shares outside Japan closed 1.4% lower. Spot gold was last down 0.2% after earlier climbing to $1,913.89, its highest since June.

A strong rally in U.S. Treasuries, driven by an initial bid in safe-haven assets after Russia ordered troops into breakaway parts of eastern Ukraine, reversed as investors took a more cautious approach to assess further developments.

The yield on 10-year U.S. Treasury notes rose 2.1 basis points to 1.951%, after an early morning price jump sent yields below 1.85% at one point. Yields move in the opposite direction to bond prices.

The dollar index was down 0.212%, with the euro up 0.32% to $1.1346. The Japanese yen weakened 0.20% versus the greenback to 114.96 per dollar, while sterling was last trading at $1.3595, down 0.02% on the day.

The Russian rouble slid to 80.9275 against the U.S. dollar in early Asian trading to its lowest level against the greenback since November 2020, before reversing course. The dollar was last down 0.7% against the rouble.

SOURCE: REUTERS