Oil soar above 100dollars and stock prices plummet as Russia attack Ukraine
After Russia launched an invasion of Ukraine, oil prices soared beyond $100 (£74) per barrel, reaching their highest level in more than seven years.
As investors fretted about the conflict’s potential consequences, global stock markets plummeted and gold prices climbed.
Russia is the world’s second-largest crude oil exporter and the world’s largest natural gas exporter.
Oil prices exceeded $105 per barrel, and UK driving groups reported that gas costs had risen to a new high.
Although Russia contributes only 6% of the UK’s crude oil and 5% of its gas, there are concerns that sanctions may restrict supplies and raise prices globally. On Thursday, the price of UK natural gas futures jumped about 30%.
Consumers in the United Kingdom are already paying a high price for energy and fuel, and demand has risen as a result of the relaxation of Covid limitations. On Wednesday, the RAC and AA motoring organisations reported that average fuel prices touched a new high of 149.43p, with diesel at 152.83p.
According to the RAC, if oil prices reach $110 a barrel, the average price of petrol could reach £1.55 per litre.
If prices rise to this level, it will “create untold financial issues for many people who rely on their cars for commuting to work and running their life, as the cost of a full tank will skyrocket to £85,” according to Simon Williams of the RAC.
Stock markets across Europe were hit hard by the news of Russia’s operations, with the FTSE 100 index in the UK plunging more than 3% and the Dax index in Germany falling more than 4.5 per cent. Earlier, Asian stocks had also plummeted.
The price of gold, which is seen as a safe haven asset in times of uncertainty, increased by 2%.
Last month, the cost of living reached a new 30-year high as energy, fuel, and food costs continued to rise, putting a strain on household budgets. Russia supplies over a third of Europe’s oil and about 40% of its gas, with much of it passing via Ukrainian territory via pipelines. It’s no surprise that costs are rising.
Brent crude oil has surpassed $100 per barrel, while wholesale gas prices – where domestic suppliers buy what they need – have also risen dramatically.
Russia’s supplies do not appear to have been harmed – at least not yet. However, the fear that they will be, and that a race for other resources would ensue, is driving up costs.
Investors are concerned about the possible economic impact of high energy prices, as well as the possibility of far broader penalties. Stock markets across Europe are plummeting.
In terms of Russian stocks, a graph depicting the performance of Moscow’s MOEX stock exchange today resembles a cliff in the Ural highlands.
More sanctions are on the horizon from the European Union on Russia
In reaction to Russia’s military intervention, European Union officials announced that new sanctions would be imposed on the country.
Because of Russia’s invasion of Ukraine and the sanctions imposed on it, agricultural supplies and raw materials from those nations may be disrupted.
The two countries together produce 29 per cent of worldwide wheat exports, with the majority of it passing through Black Sea ports.
Aluminium, cobalt, copper, diamonds, fertilizer, gold, nickel, palladium, platinum, titanium, and steel are all produced in Russia.
The European Council said in a statement that it would “impose massive and severe consequences on Russia for its actions”.
Ursula von der Leyen, President of the European Commission, said the sanctions “will target strategic sectors of the Russian economy by blocking their access to technologies and markets that are key for Russia”.
Russian assets in the EU will be frozen and Russian banks’ access to European financial markets will be stopped, she disclosed.
“These sanctions are designed to take a heavy toll on the Kremlin’s interests and their ability to finance war,” she added.
Disconnecting Russia’s banking system from the worldwide Swift payment system would have the greatest economic impact, but it might also have an impact on the US and European economies.
Swift said: “Any decision to impose sanctions on countries or individual entities rests solely with the competent government bodies and applicable legislators.”
In reaction to Mr Putin’s activities against Ukraine, the US and EU had already implemented a series of sanctions.
Five Russian banks have had their assets frozen, and three Russian millionaires have had their travel bans lifted.
On Tuesday, British Prime Minister Boris Johnson said these sanctions were a “first barrage” and could be extended.
Germany froze final approval for the Nord Stream 2 gas pipeline, which connects the country with Russia and was set to boost Russian gas exports to the EU.