Stocks fell further on Monday, while oil prices rose, as investors worried about the possibility of even higher inflation and more significant global economic damage resulting from Russia’s war in Ukraine and the sanctions that have followed. The S&P 500 finished nearly 3% lower at 4,200.89, its lowest level in more than a year, while the Dow fell 2.4 percent to 32,813.56. The Nasdaq Composite dropped 3.62 percent to 12,380.96, its lowest level in more than a month. After falling more than 20% from its recent record high, it formally entered a bear market. The German DAX index (DAX) and the STOXX 50 (FEZ) fell to enter bear markets.
The international standard, Brent crude oil prices (BZ=F), has risen to as much as $137 per barrel in the energy markets, adding to recent gains. Similarly, West Texas Intermediate crude oil (CL=F) in the United States rose to as much as $130.50 per barrel.
The rise in energy prices occurred as the White House and European nations considered imposing a ban on Russian crude oil imports to sanction Russia’s invasion of Ukraine further.
Russia provides only a tiny portion of energy products to the United States; it accounts for approximately 7.9 percent of total petroleum imports, including crude oil, in 2021.
Traders anticipated a faster shift toward renewable alternatives. Hence, on Monday, prices for metals used in fuel cell batteries and other clean energy products, such as palladium and nickel, rose.
Russia’s Invasion of Ukraine
Russia’s invasion of Ukraine—and the West’s response to it—will exacerbate the supply-demand imbalance at the heart of the global inflation surge. Sanctioning and boycotting trade with a current account surplus country means that the rest of the world must produce a larger share of its consumption.
Hatzius added that “the potential shift is fairly small at an aggregate level”; Russia only accounts for less than 2% of global goods trade and GDP. However, Russia supplies 11 percent of global consumption of oil and 17 percent of global consumption of natural gas; it includes up to 40 percent of Western European consumption.
The uncertainty surrounding global trade and critical commodity supplies has fueled fears of further inflation spikes. The Bureau of Labor Statistics will release its February Consumer Price Index later this week; economists predict it will show a 7.9 percent annual increase; the most significant increase since 1982. And, given the latest round of commodity price increases this month, another increase is possible.