Stocks plummeted after Ukraine was invaded by Russia. Credit: Ahmad Ardity, via Pixabay/Public DomainGlobal stocks plunged, while oil soared after Russian President Vladimir Putin launched a military attack on Ukraine, on Thursday. Putin’s moves drew condemnation from the West, making punishing sanctions all but certain.
“The world is shocked as Russia launches a major military offensive against Ukraine,” ING wrote Thursday. “Financial markets are predictably witnessing a flight to safety and may have to price in slower growth on the further spike in energy prices. … The question will then be which Russian financial institutions are targeted for severe financial sanctions.”
That volatility is what caused worldwide stocks to plunge on Thursday, leading to major pain for the Russian ruble.
European stocks plunge amid Russian attack
European stocks plunged on Thursday. The FTSE 100 fell 3.3% in London, while France’s CAC 40 dropped 4.1%, and Germany’s DAX 30 shed 4.5%. Russian stocks crashed, with the country’s main index dropping 45% before recovering some losses.
Asian stocks also dipped on Thursday. Hong Kong’s Hang Seng Index (HSI) dropped 3.2%, its biggest daily loss in five months. Japan’s Nikkei 225 (N225) lost 1.8%, and China’s Shanghai Composite moved 1.7% lower.
US shares tumble significantly
This is absolutely insane. CNN is literally standing next to Russian forces as they take a Ukrainian airport just outside of Kyiv. pic.twitter.com/Nif9xxs8Mx
— Marcel Dirsus (@marceldirsus) February 24, 2022
The assault began hours before dawn, quickly spreading across central and eastern Ukraine as Russian forces attacked from three sides. Putin also warned of bloodshed unless Ukrainian forces lay down their arms.
Russia is the world’s second-biggest oil producer and a major exporter of natural gas. Supply disruptions drive retail prices, meaning it could get more expensive for people around the world to fuel their cars and for Europeans to heat their homes. Gasoline prices, already at record levels in parts of Europe, could get much more expensive, if this situation continues for much longer.
Brent crude, the world’s energy benchmark, climbed above $100 a barrel for the first time since 2014 because Russia launched a military operation against Ukraine. Credit: Viktor Elias/GreekReporter.comGlobal oil supplies were already very tight.
Prices remained steadily higher for nearly a year, driven by demand following the easing of pandemic lockdown measures.
Major crude oil producers, including Russia, have been gradually increasing production but have struggled to meet their own production targets despite huge pressure from major energy consuming nations to pump more.
The Ukraine crisis adds another dimension to the oil situation.
The Russian economy is very dependent on revenue from oil and gas, so Moscow wants prices to remain elevated. Saudi Arabia, which is a major US ally, will now come under intense pressure from developed economies to increase output.
A tight oil market, tied with an armed conflict in Europe, is a potent combination for higher prices.
Analysts at Capital Economics estimate oil prices could settle as high as $140 per barrel, in a worst case scenario where energy flows are disrupted.