Climbing energy prices are roiling markets.
The I.M.F. said over the weekend that the war in Ukraine and sanctions against Russia would have a “ severe impact ” on the global economy, further disrupting supply chains and stoking already high inflation. Investors have been processing the latest developments, and markets opened on Monday with sharp moves: Most notably, energy prices are soaring and stocks are sinking. Brent crude oil, the international benchmark, briefly rose above $130 a barrel, roughly double the price a year ago. The price of European natural gas continued to soar, and is triple its level a month ago. Stocks fell in Asia and in Europe many markets have slipped into bear-market territory, down 20 percent from recent highs. Stocks in the U.S. are poised to open lower in what’s shaping up to be another tumultuous session. Energy prices are reacting to talk of an embargo on Russian oil. Western lawmakers have begun discussing a ban, long seen as unlikely. (The Treasury Department stressed that Wall Street could still trade Russian oil and gas, after some financial firms stopped.) Shell shows how difficult a total ban would be to enforce. The oil giant confirmed that it bought some Russian crude to maintain fuel supplies to Europe, even as it said it would get out of its Russia operations. “We will further reduce our use of Russian oil as alternative crudes become available to buy,” a company spokesman told Reuters, but “in the current, tight market there is a relative lack of alternatives.” Analysts are rethinking their stock-market forecasts. One theme that’s taking shape, strategists at Goldman Sachs note in a report, is a shift toward “pricing more risk premium in European assets.” Equity and currency markets in Europe have already blown past the bank’s pre-invasion downside scenario, while U.S. assets have only priced in about half of the forecast worst-case decline. (Relatedly, Goldman recently upped its expectations for buybacks and dividends at S&P 500 firms.) Holger Schmieding of Berenberg expects stocks to recover some of their losses in three to six months, but “for a while, markets can take on a self-sustaining dynamic of their own. Fear can beget fear.” The latest on the Russia-Ukraine war: China signals full steam ahead for its economy. Beijing officials over the weekend announced their economic priorities for the year, including a growth target of 5.5 percent, job creation and increased welfare spending. The pandemic’s global death toll nears 6 million. Researchers at Johns Hopkins University predicted that the world would surpass that total today.
