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Stocks fell and oil prices rose by more than $5 per barrel on Thursday as President Vladimir Putin initiated military action in Ukraine, prompting Washington and Europe to threaten Moscow with sanctions that might destabilize the global economy.
Market benchmarks in Europe and Asia plummeted as much as 4% as traders struggled to determine the extent of Putin’s incursion and the amount of Western response. Futures on Wall Street fell by an abnormally large daily margin of 2.5 percent.
Brent crude oil temporarily surpassed $100 per barrel in London for the first time since 2014, as investors worried about an interruption in supply from Russia, the world’s third-largest supplier. The price of benchmark US oil momentarily topped $98 per barrel. Wheat and corn prices have also risen.
The ruble fell by 7.5 percent versus the US dollar.
Due to rising energy prices, financial markets are on a “run to safety” and may have to price in slower growth, according to ING’s Chris Turner and Francesco Pesole in research.
The European Commission’s head warned Thursday in Brussels that the 27-nation European Union was planning “massive and targeted penalties” against Russia.
Ursula von der Leyen stated, “We will hold President Putin accountable.”
The FTSE 100 in London plummeted 2.5 percent in early trade to 7,311.69 as Europe awoke to reports of explosions in the Ukrainian capital of Kyiv, the significant city of Kharkiv, and other regions. The DAX in Frankfurt fell 4% to 14,047.18, while the CAC in Paris down 3.6 percent to 6,537.32.
Futures on Wall Street’s benchmark S&P 500 index and the Dow Jones Industrial Average were both down 2%.
This comes on top of the S&P 500’s 1.8 percent drop to an eight-month low on Wednesday after the Kremlin stated separatists in eastern Ukraine have requested military support. After acknowledging the rebels’ independence, Moscow dispatched troops to several rebel-held regions.
Putin said that Russia needed to defend people in eastern Ukraine, a reason that Washington expected he would use to justify an attack.
President Joe Biden condemned the strike as “unprovoked and unjustifiable,” and vowed Moscow will be held accountable, which many saw as new penalties imposed by Washington and its allies. Putin accused them of neglecting Russia’s demand that Ukraine not join NATO and provide Moscow with security assurances.
