Oil has surged past $100 a barrel for the first time, gas prices have climbed 60% higher, and global stock markets have plunged as Russia launched its invasion of Ukraine.
Fears of a wider conflict, additional sanctions and higher inflation arising from President Vladimir Putin’s order to attack prompted a rush of activity on global markets, first felt in Asia where stock markets were widely down by 3%.
In London, the FTSE 100 was 3.5% lower in afternoon trading while France’s CAC index and Germany’s DAX were each off by more than 4%.
On Wall Street, the Dow Jones and S&P 500 opened more than 2% in the red while the tech-heavy Nasdaq shed more than 3% – taking into so-called “bear market” territory more than 20% below its previous peak in November.
Investors sought sanctuary in safe havens such as gold and the US dollar – sending the pound nearly three cents lower versus the greenback to less than $1.33. The fall of nearly 2% was the biggest one-day decline since March 2020.
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Brent crude, the international oil benchmark, rose by more than $4 a barrel on reports of the first explosions in Ukraine, to cross the $100 barrier immediately – for the first time since September 2014.
More on Russia Related Topics: RussiaUkraineBut it continued to climb, passing $105, as the implications and full extent of the invasion became clearer, signalling additional price pressures for a global economy already battling a COVID-linked surge in inflation.
Wholesale gas prices also surged higher – with the already-elevated price per therm for next-day delivery climbing by 60% to 320p.
At that level the price was still below the 460p peak seen in December.
But the oil and gas surge is forecast to mean more woe for UK consumers, adding to pressure on fuel prices that are already at record levels and closing in on an unprecedented rate of 150p per litre for unleaded petrol.
Analysts predicted that the wholesale gas spike would mean another sharp increase in the energy price cap this autumn – with households already facing a typical £700 rise in their bills from April.
According to Samuel Tombs, UK economist at Pantheon Macroeconomics, the increases – if sustained – could see inflation peak at 8.2% in the spring.
Prices for wheat, corn and other food staples as well as precious metals also rose.
Financial services stocks felt some of the worst pain on London’s blue chip index, with only a handful of stocks in positive territory.
Polymetal and Evraz – two miners with major operations in Russia – were the biggest fallers, by 38% and 29% respectively in mid-afternoon dealings.
Travel stocks were hit too as flights to Ukraine were widely suspended, with airlines forced to divert planes away from Ukraine’s airspace.
British Airways owner International Airlines Group fell nearly 6% and easyJet slid by 7%.
Russia’s own stock market took a hammering.
A collapse in the value of the rouble versus the US dollar – to a record low – meant the dollar-linked RTS index had lost almost 50% of its value at one stage in Moscow.
Ipek Ozkardeskaya, senior analyst at Swissquote, said markets had clearly entered “panic” mode with the likes of wheat – a big Russian export – also up sharply together with a host of other commodities from sugar and cotton to orange juice and live cattle.
Cryptocurrency took a battering – with Bitcoin’s sensitivity evident through an 8% slide to just over $34,000.
Russ Mould, investment director at AJ Bell, said of the FTSE 100’s decline: “The surge in the oil price is terrible news for businesses and consumers, and fundamentally this clarifies one of the key impacts of the Russia/Ukraine war – it will serve to further stoke inflation.
“Not only will energy bills keep going up, but food prices look set to jump even higher.
“Ukraine and Russia are both big food suppliers and any disruption to supplies will force buyers to seek alternative sources, which could jack up prices,” he warned.