European stocks tumbled, commodities surged and the euro hit its weakest level against the dollar for almost two years after the US said it was discussing a ban on oil imports from Russia.
The Stoxx 600 share index, which dropped 7 per cent last week in its worst performance since March 2020, lost a further 2.8 per cent in early dealings on Monday, following sharp declines in Asia.
The gold price breached $2,000 for the first time since August 2020 in Asian trading as investors sought shelter from market risk in the haven asset. The dollar index, which measures the US currency against six others, hit its highest point since May 2020. The euro fell 0.4 per cent to $1.08, also its weakest level against the dollar since May 2020.
International oil benchmark Brent crude rose almost 18 per cent to $139.13 a barrel in early trading on Monday, its highest level since 2008, before paring gains to be up 9 per cent at $128.68.
Global financial markets have been particularly volatile since late February, when Russian president Vladimir Putin launched a full-scale invasion of Ukraine. The further ructions on Monday came as traders assessed the economic fallout for commodities from the two producer nations dropping out of global supply chains.
US secretary of state Antony Blinken said on Sunday Washington was in “very active discussions” with European allies. Nancy Pelosi, US House speaker, said Congress was “exploring” legislation to ban the import of Russian oil.
“The world is very unprepared for this shock,” said Robert Rennie, global head of market strategy at Westpac. He said it was unclear if a US ban would cover only oil or all Russian energy imports, but said the latter would have a “catastrophic impact” on energy prices.
In Russia, the ruble weakened to as much as Rbs138.5 against the dollar, marking a fresh record low for the Russian currency. The currency had traded at about Rbs81 to the dollar a day prior to Russia’s invasion of Ukraine.
Hong Kong’s Hang Seng share led falls in Asia, dropping 3.7 per cent and on track for its lowest close since the beginning of the coronavirus pandemic. Tokyo’s Nikkei 225 declined 2.9 per cent, its worst trading day since late January.
The prospect of expanded sanctions hitting Russian oil shipments has jolted global commodity markets already unsettled by the increasing difficulty of transacting with Russian providers. European natural gas futures rose as much as 38.7 per cent on Monday morning to €267 per megawatt hour, a new all-time high. A year ago, the price was around €16.
Other commodities, including palm oil and nickel, have hit multiyear highs since the outbreak of war. On Monday, palladium, a key component of catalytic converters in cars, jumped as much as 5.4 per cent to a record high of more than $3,174 an ounce.
Wheat futures rose 7 per cent to $12.94 a bushel.
In Chinese markets, iron ore futures rose as much as 7.6 per cent to Rmb874.50 ($138.53) a tonne while nickel rose 12 per cent to a record high of Rmb210,950 a tonne.
Unhedged — Markets, finance and strong opinion
Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent straight to your inbox every weekday