LONDON– Oil and gas prices surged while stock markets fell on Wednesday (23) on renewed fears over Russian energy supplies and soaring inflation.
Crude futures jumped more than 4% with Brent North Sea, the international benchmark, exceeding $120 per barrel.
The oil and gas price increases “may be contributing to the declines we’re seeing in equity markets, given the additional pressures that will be put on households and businesses should it be maintained,” said Craig Erlam, analyst at OANDA foreign exchange platform.
Russian Deputy Prime Minister Alexander Novak on Wednesday warned that a ban on Russian oil and gas imports over the Ukraine war – which some EU countries are demanding – would drive the world’s energy markets to a “collapse”.
“The rise in energy prices may be unpredictable,” Novak added.
Moscow could face more sanctions as US President Joe Biden left Wednesday for Europe on a mission to bolster Western unity against Russia, though Europe has avoided an oil embargo so far.
Concerns over supply also rose as Russia warned that repairs at a terminal near a Black Sea port may take up to two months and lead to a drop in oil exports of about one million barrels per day.
Gas prices rose after President Vladimir Putin announced that Russia will now only accept rubles for gas deliveries to “unfriendly countries”, which include EU nations.
The ruble, which has plummeted since the war broke out, gained against the dollar and euro following Putin’s announcement.
Europe’s gas price reference Dutch TTF briefly rose past 130 euros per megawatt hour before falling back to 117 euros later in the day.
“Russia is now trying to pressure the West with counter sanctions — and reduce its dependence on foreign currencies,” Swissquote senior analyst Ipek Ozkardeskaya told AFP.
“Now let’s see if the European leaders will have the guts to walk away from the Russia oil and gas, which would obviously neutralize Russia’s latest move. What a chess game,” she said.
On stock markets, London’s benchmark FTSE 100 index finished 0.2% lower as British finance minister Rishi Sunak said the UK economy would grow far slower than expected this year due to the Ukraine war and soaring global inflation.
In Frankfurt, the DAX closed 1.3% lower while the Paris CAC 40 was down 1.2%.
Wall Street was down after midday, with the Dow Industrial Average off 1%.
“The markets continue to contend with the uncertainty regarding the ongoing war in Ukraine, and persistently elevated and broad-based inflation pressures,” analysts at Charles Schwab investment firm said in a note.
Asian stock markets closed higher after a Wall Street rally the previous day.
US shares had risen Tuesday (22) on optimism that the Federal Reserve’s plan to hike interest rates would help to bring inflation under control.
While there remains plenty of concern about the war in Ukraine, analysts said some confidence had seeped back into trading floors as investors bet on consumer resilience and economies continue to reopen as Covid restrictions are lifted.
“There is a narrative taking root that the bad news is priced in,” said Briefing.com analyst Patrick O’Hare.
– Agence France-Presse
