Global stocks slumped on the Asian markets on Thursday. The dollar, gold and oil prices jumped, and U.S. Treasury yields fell amid growing fears of a full-scale Russian invasion of Ukraine.
As one of the worst post-Cold War security crises in Europe for decades worsened, oil prices gained more than $1 on Thursday morning as Russia’s invasion of Ukraine began.
Brent crude rose almost 4 dollars, or 3.93%, to $107.57 a barrel after soaring as high as $98.08.
U.S. West Texas Intermediate crude futures also jumped 85 cents, or 0.9%, to $92.95 a barrel, after rising to as much as $93.50.
Oil rose to more than $100 a barrel for the first time since 2014 on Thursday morning as Russia moved troops into Ukraine
Russia is the world’s second-largest oil producer, which mainly sells crude to European refineries, and is the largest supplier of natural gas to Europe, providing about 35% of its supply.
Overnight, U.S. stocks took a beating, with the Dow Jones Industrial Average down 1.38% to barely above the level that would have confirmed a correction. The MSCI World Index , a leading gauge of equity markets globally, skidded to its lowest level since April 2021.
In Asia on Thursday, the selloff showed no signs of abating.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6% in morning trade, with Australian shares at one point diving nearly 3%. In Tokyo, the Nikkei was 1.1% lower. Chinese blue chips fell 0.6%.
‘The markets figure Russia will now do what ever it wants given how weak the sanctions were, and are pricing in an invasion,’ said Ray Attrill, head of FX strategy at National Australia Bank.
‘The real worry is that Europe is cut off from Russian gas. The EU couldn’t cope with such a supply shock and would have to rein in demand, which would be economically debilitating,’ he added. ‘Higher energy prices are also where the rubber hits the road as far as global economic growth is concerned, that’s got to be bad for risk sentiment.’
The Russian rouble turned lower, slipping 0.1% against the dollar after falling more than 3% on Wednesday.
‘Markets are now more adequately pricing in the risk of something horrific happening. That combined with the uncertainty is a horrible environment to be in. No one wants risk exposure when that’s floating around,’ said Rob Carnell, head of Asia Pacific research at ING.
Russian President Vladimir Putin declared war on Ukraine and gave a chilling warning to its allies in the west in an early Thursday morning address
Airlines have been told to stop flying over any part of Ukraine because of the risk of an unintended shootdown or a cyber attack targeting air traffic control amid tensions with Russia, a conflict zone monitor said.
The warning was followed by a notice to airmen that said flights of civilian aircraft in Ukraine’s airspace are ‘restricted due to potential hazard for civil aviation.’
Adding to tensions, hundreds of Ukraine computers have been hit by data-wiping software as part of what country officials said was an intensifying wave of hacks aimed at the country as Russia massed troops around its borders.
‘After a lull yesterday where the Russia-Ukraine situation fell out of the headlines, its inevitable reemergence overnight has caused a flight to safety once again and lifted oil over fears of a disruption in global energy supplies,’ said Jeffrey Halley, senior market analyst at OANDA.
‘One factor that could act as a temporary brake on prices is the Iran nuclear deal with rumors swirling around that a new agreement could be announced, possibly as early as this week,’ he added. ‘However Ukraine fears, and their wider ramifications will continue to support oil prices which remain a solid buy on dips.’
An explosion is seen in the early hours of Thursday in the Ukrainian city of Kharkiv
The U.S. and Iran have been engaged in indirect nuclear talks in Vienna, in which a deal could lead to the removal of sanctions on Iranian oil sales and increase global supply.
Additionally, U.S. crude stockpiles rose 6 million barrels last week while distillate stocks fell, according to market sources who were citing American Petroleum Institute figures late on Tuesday.
Ahead of government data on Thursday, analysts forecast a 400,000-barrel build in crude and a drawdown in fuel stockpiles.
Gasoline inventories rose by 427,000 barrels and distillates stockpiles fell by 985,000 barrels, the API data showed according to the sources, who spoke on condition of anonymity.