Japan’s Nikkei slumped 3.2%, MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.6%, the Sensex opened 2.3% down and Chinese blue chips lost 0.8%
Oil prices soared to a 14-year high, gold crossed $2,000 and shares sank in hectic trading on Monday as the risk of a US and European ban on Russian products and delays in Iranian talks triggered what was shaping up as a major ‘stagflationary’ shock for world markets.
Oil at one point rocketed almost 18% to $139.13 – the highest since mid-2008 – after US Secretary of State Antony Blinken said the White House and allies were in talks about banning imports from Russia.
That jump will act as a tax on consumers and the potential blow to global economic growth saw S&P 500 stock futures shed 1.5%, while Nasdaq futures dropped 1.9%. US 10-year bond yields also dropped to their lowest since early January.
Having climbed 21% last week, Brent crude was further energised by the risk of a ban on Russian oil by the United States and Europe.
Japan’s Nikkei slumped 3.2%, while MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.6%. The Sensex opened 2.3% down and Chinese blue chips lost 0.8% amid a sea of red across Asian markets.
If the West cuts off most of Russia’s energy exports it would be a major shock to global markets, BofA chief economist Ethan Harris said.
He estimates the loss of Russia’s 5 million barrels could see oil prices double to $200 a barrel and lower economic growth globally.
And it is not just oil, as commodity prices have made their strongest start to any year since 1915, BofA said. Among the many movers last week, nickel rose 19%, aluminium 15%, zinc 12%, and copper 8%, while wheat futures surged 60% and corn 15%.
That will only add to the global inflationary pulse with US consumer price data this week expected to show annual growth at a stratospheric 7.9%, and the core measure at 6.4%.
