Trading floors were a sea of red in early exchanges with experts warning of a period of stagflation with the spike in crude likely to light a fire under already high inflation.
The commodity at one point rocketed almost 18 percent to $139.13 — a level not seen since mid-2008 — after US Secretary of State Antony Blinken said the White House and allies were in talks about banning imports from Russia.
With the country the third-biggest producer of oil, such a move would compound a supply crisis just as demand takes off. Other commodities sourced from the region, such as wheat and metals, were also sharply higher.
Mike Muller of Vitol warned of further pain.
“We have plenty of twists and turns to come,” he told a podcast produced by Dubai-based consultant and publisher Gulf Intelligence.
“While I think the world is already pricing in the fact there’ll be an inability to take in a serious amount of Russian oil in the western hemisphere, I don’t think we’ve priced in everything yet.” World governments had until now not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, though trade has become increasingly tough as banks pull financing and shipping costs rise.
The surge in crude is giving central banks a headache as they start to tighten pandemic-era monetary policy to fight inflation, which is already at a 40-year high in the United States.
The International Monetary Fund warned at the weekend that the war and sanctions on Russia will have a “severe impact” on the global economy.
National Australia Bank’s Tapas Strickland said: “Global growth fears abound given the surge in commodity prices, with ‘stagflation’ again rearing its head in what must be akin to a horror movie for a central bank.
“A key question for markets is how do central banks respond to higher inflation and the possibility of slower growth ahead.” Concerns about the impact on the global economy have rattled through markets, with European equities particularly badly hit owing to the continent’s reliance on Russian energy. The euro remained wedged below $1.10 for the first time since mid-2020.
On Monday, Asian bourses were deep in the red, with Hong Kong at one point losing more than 4 percent, while Tokyo and Taipei were off more than 3 percent.
Seoul and Manila were both down more than 2 percent, with Shanghai, Sydney and Wellington off more than 1 percent. There were also steep losses in Singapore and Jakarta. US futures were sharply lower.
The panic on trading floors sent safe havens sharply higher, with gold — a key go-to in times of crisis and turmoil — hitting as much as $2,000.86, its highest since mid-2020.
The dollar was also well up against most other currencies while Treasuries continued to rally.
As Europe and UK natural gas prices soared to record highs Monday, the European Union and United States mulled sanctions on Russian energy.
Europe gas reference Dutch TTF rocketed more than 60 percent to 345 euros per megawatt hour and UK gas hit 800 pence per therm.
Brent North Sea crude oil surged close to $140 per barrel and a near 14-year high.
Blinken said the White House and allies were in talks about banning energy imports from Russia following its invasion of Ukraine.
Russia is a leading supplier of natural gas and is also one of the world’s biggest crude producers.
No show Russia declined to attend a hearing at the UN’s top court on Monday at which Ukraine is asking for an immediate order to halt the conflict, the head judge said.
“The court regrets the non-appearance of the Russian Federation in these oral proceedings,” International Court of Justice (ICJ) President Joan Donoghue said.
The Russian ambassador to the Netherlands, Alexander Shulgin, wrote to the court and “indicated that his government did not intend to participate,” she said.
Ukraine’s representative at the court in The Hague, Anton Korynevych, criticized Russia for not showing up at the ICJ’s Peace Palace headquarters.
“The fact that Russia’s seats are empty speaks loudly. They are not here in this court of law, they are on a battlefield, waging aggressive war against my country,” he said.
“This is how Russia solves disputes.” Kyiv lodged an urgent case at the ICJ on February 27, saying that Russia had illegally justified its war by falsely alleging genocide in Ukraine’s Donetsk and Luhansk regions.
Ukraine has asked the court to take provisional measures ordering Russia to “immediately suspend the military operations” pending a full judgment that could take years.
Korynevych added that the court “has a responsibility to act.” “Russia must be stopped, and the court has a role to play in stopping that,” he said.