Oil rises above $116 a barrel as stocks falter amid tensions
Oil prices soared to dizzying heights on Thursday as investors maneuvered around Russian energy products. West Texas Intermediate, the US oil benchmark, hit $116 a barrel in premarket trading for the first time since 2008. Prices eased in afternoon trading on hopes that a nuclear deal between the United States and Iran could soon add more oil to the market. .
All three major US indices opened higher but turned negative in morning trade and continued to falter. The Dow Jones closed down 0.3%, while the broader S&P 500 index was down 0.5% and the Nasdaq was down about 1.6%.
“The drop in prices is really symptomatic of the uncertainty associated with the situation in Ukraine,” Wayne Wicker, chief investment officer at Mission Square Retirement, told The Washington Post. “Investors should be prepared for a wide range of overnight returns given the number of issues going on right now.”
Stocks rallied on Wednesday after Federal Reserve Chairman Jerome H. Powell signaled to the House Financial Services Committee that he would support an interest rate hike lower than some investors had expected. as the central bank tried to contain inflation. Powell said Russia’s war in Ukraine had “highly uncertain” implications for the US economy, and he signaled the Fed would be nimble in its response.
Investors generally look beyond geopolitical tensions, but stocks have been moving alongside news trends since the invasion of Ukraine began last week. Russia’s role as one of the world’s largest energy producers means the effects of sanctions and the range of possible Russian responses could ripple through the US economy, further fueling inflation which reached its highest level in 40 years.
Financial markets hate uncertainty and conflict is adding to the tangle of tensions that caused a volatile start to trading in 2022. Before conflict erupted in Ukraine, companies were already vexed by labor shortages implementation, a deeply troubled global supply chain, soaring inflation and the lingering threats of the coronavirus pandemic.
More than a million refugees have fled Ukraine since the invasion began, according to the UN High Commissioner for Refugees, in an exodus that is set to become Europe’s worst humanitarian crisis this century.
Gold, a Russian exporter and haven for investors amid international turmoil, continued to rise on Thursday, rising about 1% to trade around $1,940 a troy ounce.
“Investors will struggle to find a reason to reinvest aggressively in equities until a major de-escalation with the Ukraine-Russia conflict occurs and inflation shows signs of slowing,” he said. Thursday Ed Moya, senior market analyst at OANDA, in comments sent by e-mail. at the post office.
Prices for aluminum, nickel and wheat – other exports linked to Russia and Ukraine – also hit multi-year highs.
This week, the US government and its European allies introduced sweeping sanctions prohibiting all US and EU citizens from trading with the Russian central bank. The sanctions also apply to Russia’s finance ministry and the country’s sovereign wealth fund.
On Thursday, the Biden administration unveiled new sanctions targeting Russian oligarchs, including Alisher Usmanov, the owner of a steel conglomerate that Forbes has estimated to be worth more than $15 billion. The White House said Usmanov’s property would be banned from use in the United States, including his superyacht and his private jet, which is one of Russia’s largest private planes.
In recent days, officials have also moved to ban several major Russian banks from SWIFT (a global money transfer service) and prevent Russia’s central bank from bailing out the national economy. Other costs are piling up: 33 countries, including the United States, Canada and members of the European Union, have closed their airspace to Russian planes – a decision that Russia made and which will probably increase the Trip costs.
International sports organizations have severed their ties with Russia and deprived the country of the right to organize major events. Automotive giants such as Volkswagen and Mercedes-Benz have halted exports to Russia, while furniture giant Ikea said on Thursday it would close its Russian stores, suspend production in the country and stop selling. to export goods there.
The value of the ruble plunged to less than 1 cent this week as Russia felt the full brunt of sanctions. The Bank of Russia kept the country’s stock exchange closed for several days in a bid to stem the flow of money out of the economy, which was already showing severe distress before the new measures were implemented. Last week, as Russia’s incursion into Ukraine unfolded, Moscow’s MOEX index suffered one of the largest stock market crashes in stock market history.
Russian stocks listed outside the country also felt the pain. Index provider MSCI said on Wednesday it would eject Russian stocks from its emerging market indexes, arguing that the country’s stock market has become “uninvestable”. On Thursday, the London Stock Exchange blocked trading in shares of 27 companies with close ties to Russia, including energy giants Gazprom, Lukoil and Rosneft.
The good news is that the U.S. economy has “negligible direct exposure to the Russian economy” and the staggering weakness in Russian markets is unlikely to trickle down to U.S. stocks, according to Jeff Buchbinder, equity strategist at LPL Financial.
“The United States imports next to nothing from Russia, or Ukraine, for that matter,” Buchbinder said Thursday in emailed comments to The Post.
He estimated that the percentage of revenue generated by S&P 500 companies in Russia is even lower, but acknowledged that “high oil prices will eat away at consumers’ wallets.”