Commodity prices surged as global shares sold off and the euro sank after the US announced it was discussing a ban on oil imports from Russia with European partners.
International benchmark Brent rose as high as $139.13 a barrel, up about 18 per cent from Friday’s closing level and touching its highest level since 2008, while US marker West Texas Intermediate climbed as much as 12.8 per cent to $130.50.
The surge in oil prices came after US secretary of state Antony Blinken said Washington was in “very active discussions” with European allies. Nancy Pelosi, US House Speaker, also said Congress was “exploring” legislation to ban the import of Russian oil.
Restrictions on Russian oil would mark a major escalation in the west’s response to Moscow over its invasion of Ukraine and a sharp reversal by the White House, which had recently rejected calls to expand sanctions over the threat of spiralling prices.
“The world is very unprepared for this shock” said Robert Rennie, global head of market strategy at Westpac. He said it was unclear if a US ban would cover only oil or all Russian energy imports, but said the latter would have a “catastrophic impact” on energy prices.
The possibility of sanctions hitting the energy market has jolted global commodity prices. Palladium, a key component for catalytic converters in cars, jumped more than 5 per cent to a record high of $3,165.38 an ounce.
In Chinese markets, iron ore futures rose as much as 7.6 per cent to Rmb874.50 ($138.53) a tonne while steel futures jumped as much as 4 per cent to Rmb5,076 a tonne and nickel rose almost 8 per cent to a record high of Rmb203,140 a tonne.
Equity markets across Asia sold off on the prospect of sharply higher energy prices. Hong Kong’s Hang Seng led the region lower with a fall of almost 4 per cent, while Japan’s benchmark Topix index shed 3.4 per cent and South Korea’s Kospi fell 2.3 per cent. China’s CSI 300 index fell 2 per cent.
Futures pointed to sharp falls for European equities, with the Euro Stoxx 50 tipped to fall 3.6 per cent and the FTSE 100 expected to fall 3 per cent. The S&P 500 was set to dip 1.6 per cent when trading begins on Wall Street later in the day.
Traders dumped riskier assets in favour of sovereign debt, pushing yields lower. The yield on the 10-year US Treasury fell 0.06 percentage points to 1.67 per cent.
Investors also sought safety in the dollar, sparking falls for a host of currencies. The euro fell almost 1 per cent to $1.08 while the Australian dollar fell about as much to $0.74. Sterling was down 0.2 per cent at $1.32.
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