US oil hits highest level in 14 years and wheat prices surge

US oil prices shot up to the highest level since 2008 while the global Brent benchmark hit $120 a barrel, as indications Russia had seized its first major Ukrainian city boosted expectations of further sanctions.

West Texas Intermediate breached $116 a barrel, a level last struck 14 years ago. International oil benchmark Brent crude rose as much as 6 per cent to the highest since 2012, putting it up about 50 per cent for the year.

Wheat prices also climbed above $11 a bushel for the first time in 14 years. Boycotts of Russian suppliers have also hit natural gas, with European prices on Thursday rising 15 per cent to €199 a megawatt hour, a new all-time high.

The moves came after Russian forces over-ran Kherson, a provincial capital and Black Sea port, in a capture not yet confirmed by Ukraine’s military but suggested to have occurred by the city’s mayor.

European equity markets opened higher as commodity-linked stocks rose along with shares in tech groups whose earnings prospects are viewed as less likely to be influenced by short-term economic trends.

The regional Stoxx 600 share index, which is down more than 8 per cent so far this year, fell 0.2 per cent in early dealings, but oil producers’ shares rose and a sub-index of basic materials producers gained 2.5 per cent. Germany’s Dax added 0.2 per cent and London’s FTSE 100 edged 0.3 per cent higher.

Global oil prices have surged despite western governments largely sparing the Russian energy sector from sanctions imposed following its invasion of Ukraine.

“The market’s ability to access crude from the region because of sanctions or a risk of outright supply losses look set to persist for a prolonged period, given the realities on the ground,” said Louise Dickson, senior oil market analyst at Rystad Energy.

Wheat futures traded in Chicago also rose, gaining as much as 13 per cent to $11.32 a bushel, as the conflict has severely disrupted shipments from Ukraine and Russia. The two countries account for almost a third of global exports.

Earlier in the day, Asian equity markets were generally well supported after Jay Powell, US Federal Reserve chair, indicated the US central bank would raise interest rates more slowly given the Ukraine conflict.

Hong Kong’s Hang Seng index added 0.6 per cent and Tokyo’s Nikkei 225 added 0.7 per cent, while mainland China’s CSI 300 lost 0.6 per cent.

Those moves followed a rally on Wall Street on Wednesday in response to Powell’s comments to US legislators that the Fed was prepared to push ahead with rate increases, although he added that “we will proceed carefully as we learn more about the implications of the Ukraine war for the economy”. The S&P 500 closed nearly 2 per cent higher while the Nasdaq Composite rose 1.6 per cent.

“The Fed wants to start tightening policy to curb inflation but doesn’t want to unsettle investors shocked by Russia’s war,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore, adding that Powell’s comments were in line with expectations for five rate rises from the US central bank this year.