HONG KONG: Stocks tumbled on Monday, oil prices surged to near 14-year highs and safe-haven gold topped $2,000 as investors grew increasingly concerned about the impact of the Ukraine war on the global economy.
The trading floor was a sea of red in early trading, with experts warning that a surge in crude oil prices could trigger a period of stagflation amid already high inflation.
The commodity plunged nearly 18% to $139.13 at one point — its highest level since mid-2008 after U.S. Secretary of State Antony Blinken said the White House and its allies were negotiating a ban on imports from Russia .
As the country is the third largest oil producer, such a move would exacerbate a supply crisis at a time when demand is taking off. Other commodities from the region, such as wheat and metals, also rose sharply.
And Mike Muller of Vitol warned of further pain.
“We have plenty of twists and turns to come,” he told a podcast produced by Dubai-based consultant and publisher Gulf Intelligence.
“While I think the world is already pricing in the fact there’ll be an inability to take in a serious amount of Russian oil in the western hemisphere, I don’t think we’ve priced in everything yet.”
World governments had until now not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, though trade has become increasingly tough as banks pull financing and shipping costs rise.
The surge in crude is giving central banks a headache as they start to tighten pandemic-era monetary policy to fight inflation, which is already at a 40-year high in the United States.
The International Monetary Fund warned at the weekend that the war and sanctions on Russia will have a “severe impact” on the global economy.
National Australia Bank’s Tapas Strickland said: “Global growth fears abound given the surge in commodity prices, with ‘stagflation’ again rearing its head in what must be akin to a horror movie for a central bank.
“A key question for markets is how do central banks respond to higher inflation and the possibility of slower growth ahead.”
Concerns about the impact on the global economy have spread through markets, with European stocks particularly hard hit due to the continent’s reliance on Russian energy. The euro fell below $1.10 for the first time since mid-2020.
Asian stocks were in deep losses on Monday, with Hong Kong falling more than 4% at one point, while Tokyo and Taipei fell more than 3%.
Seoul and Manila both fell more than 2%, while Shanghai, Sydney and Wellington all fell more than 1%. Singapore and Jakarta also saw sharp declines. U.S. futures were sharply lower.
The panic on the trading floor led to a surge in safe-haven assets, with gold – a key choice in times of crisis and turmoil – hitting $2,000.86, its highest level since mid-2020.
The dollar also rose sharply against most other currencies, while U.S. Treasuries continued to rise.