Oil prices climb and stocks drop over fears of Russian attack on Ukraine

Oil prices rose to a fresh seven-year high and European and Asian equities fell on Monday after US officials warned a Russian attack on Ukraine could be imminent.

The regional Stoxx Europe 600 index fell 1.9 per cent in early dealings, while the UK’s FTSE 100 declined 1.2 per cent. Russia’s Moex share index fell 2.6 per cent to the lowest level since late January.

The latest volatility in global stock markets, which have dropped this year as central banks tighten monetary policy, came as German chancellor Olaf Scholz prepared to travel to Moscow to urge Vladimir Putin from launching an invasion of Ukraine.

US President Joe Biden on Sunday spoke to his Ukrainian counterpart and said Washington would respond “swiftly and aggressively” to any Russian military action, according to the White House.

The last-ditch effort by Scholz comes as western nations withdrew diplomatic and military personnel from Ukraine and some European countries braced for an influx of refugees in the event of military action.

On Monday, energy prices climbed as investors focused on the latest Ukraine developments. Brent crude, the international benchmark, rose as much as 1.8 per cent to $96.16 a barrel, marking the highest level since September 2014 and reflecting a year-to-date rise of about 23 per cent.

European natural gas contracts for next-month delivery jumped 12 per cent higher to €83.41 per megawatt hour.

European bonds rallied as traders sought shelter in the lower-risk assets.

Germany’s benchmark 10-year Bund yield, which has risen sharply in recent weeks on prospects of the European Central Bank rolling back its pandemic-era stimulus, declined by 0.05 percentage points to 0.24 per cent. The equivalent UK gilt yield fell 0.06 percentage points to 1.49 per cent.

“The whole situation remains quite fluid,” said Marcella Chow, global markets strategist at JPMorgan Asset Management in Hong Kong. Chow added that energy markets in particular remained on edge as Russia was responsible for a third of Europe’s natural gas and 10 per cent of global oil production.

“If there are any disruptions or threats of shutdowns for supply, that will naturally push prices higher from the already elevated levels we’ve seen so far,” she said.

The falls for global stocks came on the back of a sell-off for Wall Street on Friday, where the S&P 500 dropped almost 2 per cent. In Asian equities, Hong Kong’s benchmark Hang Seng fell 1.4 per cent, while Japan’s Topix and South Korea’s Kospi both closed 1.6 per cent lower.