TOKYO: Oil prices jumped more than $2 to a fresh seven-year high on Tuesday after Moscow ordered troops into two breakaway regions in eastern Ukraine, escalating a crisis that western leaders have warned could spark a war.
US and European officials condemned the moves, but a Biden administration official said Russia’s military action did not as yet constitute an invasion that would trigger a broader sanctions package. Ukraine’s foreign minister said he had been assured of a “resolute and united” response from the European Union.
Brent crude futures rose $2.10, or 2.2%, to $97.49 a barrel, adding to a 2% gain on Monday. Earlier on Tuesday it hit $97.66, its highest since September 2014. US West Texas Intermediate (WTI) crude futures jumped $3.25, or 3.6%, to $94.32 a barrel versus Friday’s settlement. The US market was closed on Monday for a public holiday.
Analysts say the big question hanging over the oil market is whether Russian energy exports would actually be disrupted if Moscow went ahead with a fullscale invasion of Ukraine and western governments imposed sanctions against Russian financial institutions.
Global stocks tumbled while safe-havens rallied after the escalation in Ukraine. MSCI’s broadest index of Asia Pacific shares outside Japan skidded 1.44%, dragged down by markets in Hong Kong and mainland China. Japan’s Nikkei shed 2%. S&P 500 futures fell 1.5%, Nasdaq futures lost 2.2%, and the Russian rouble briefly touched an 18-month low in early Asia trade on Tuesday, after Russia’s MOEX equity index had fallen 10.5% the day before.
READ MORE: Putin orders Russian troops to Ukraine after recognising breakaway regions
In Hong Kong, shares of Russian aluminium producer OK Rusal , plunged as much as 22.1% to HK$6.18, their biggest daily percentage decline since April 2018. Hong Kong-listed Chinese tech stocks fell 2.25%, with heavyweights Tencent and Alibaba both hit by speculation about a new wave of regulatory scrutiny.
In currency markets, the yen rose as much as 0.2% in Asia to a nearly three-week high of 114.50 per dollar, before paring its gains. The euro fell 0.1% to a one-week low of $1.1296.
The nerves also drove US Treasury yields lower, with benchmark 10-year Treasury yields diving as much as 5.5 basis points to 1.8715%. Bets on Federal Reserve rate hikes also eased and the chance of a 50-bp hike next month fell below 1-in-5.
US policymakers have been sparring publicly about how aggressively to begin tightening. Federal Reserve Governor Michelle Bowman said she will assess incoming economic data over the next three weeks in deciding whether a half percentage point interest rate rise is needed at the central bank’s next meeting in March.
