HONG KONG: Asian markets mostly fell again on Tuesday as investors tried to assess the economic impact of the Ukraine war, while oil prices extended gains after surging to near 14-year highs.
Commodity prices have risen to record or multi-year highs as Russia continues to invade its neighbors, forcing observers to reassess their prospects for a global recovery, with some now warning of a period of soaring inflation and low growth or recession .
Trading floors were a sea of red on Monday, with Brent rising to nearly $140 for the first time since 2008 after the United States said it was considering a ban on crude imports from Russia, the world’s third-largest producer.
Although black gold retreated slightly, it was still at high levels and continued to rise on Tuesday, with Brent crude holding above $125 and WTI above $120.
Europe wasn’t so keen on the idea, with German Chancellor Olaf Schultz saying Russian oil and gas were “crucial” to the continent’s economy. About 40% of EU gas imports and a quarter of oil come from Russia.
Meanwhile, Moscow has warned it could cut off gas supplies to Europe via the Nord Stream 1 pipeline in retaliation for harsh sanctions imposed on its incursion.
European natural gas prices hit record highs on Monday, while other commodities from Ukraine and Russia also rose, with nickel and wheat hitting record highs.
The crisis comes at a time when uncertainty is rising as prices soar amid soaring oil demand, tight supplies and supply chain disruptions caused by the pandemic.
At the same time, central banks began to ease the ultra-loose monetary policies they implemented at the start of the pandemic in an attempt to rein in runaway prices.
While analysts have lowered their expectations for the magnitude and speed of policy tightening by officials in the war, they still see a tougher investment environment ahead.
“It’s all about slowing growth and rising inflation,” Alifia Doriwala of Rock Creek told Bloomberg Television. “With the sanctions on Russia intensifying, it’s hitting all sectors. Then you are going to have some central bank action amidst much uncertain economic growth.”
After a rout on US markets, Asia was again in negative territory, though the losses were less severe than the previous two days.
Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei and Manila were all off, though Jakarta eked out small gains.