Daily Management Review

Crude Pushed Up To Historic Highs By The Ukraine War


Crude Pushed Up To Historic Highs By The Ukraine War
The potential of a U.S. and European boycott on Russian exports, including oil and gas, as well as the delay of Iranian talks, pushed global crude oil prices to new highs on Monday. As the world markets confront a massive stagflation shock, these factors have caused oil prices to rise.
The Russian-Ukraine war shows no signs of abating, causing the euro to sink further, nearing parity with the safe-haven Swiss franc, and commodities of all types to rise.
Russia has called its invasion of Ukraine, which began on February 24, a "special military operation," and has claimed that it has no plans to seize the country.
Brent was last quoted $9.95 higher at $128.06, having risen 18 per cent in early trade, while US crude was up $8.35 to $124.03.
As a result of the increase, S&P 500 stock futures declined 1.3 per cent, while Nasdaq futures slid 1.7 per cent, acting as a levy on consumers and perhaps a blow to global economic development. In the United States, ten-year bond rates have also plummeted to their lowest level since early January.
The EUROSTOXX 50 futures plummeted 3.0 per cent, while the FTSE futures sank 2.7 per cent.
The Nikkei 225 index of Japanese stocks sank 3.4 per cent to a 15-month low, while the MSCI Asia-Pacific shares index lost 2.4 per cent. Chinese blue chips sank 2.3 per cent in a wave of red engulfing Asian markets.
The potential of a US and European embargo on Russian oil lifted the price of Brent crude, which had climbed 21 per cent in the previous week.
"If the West cuts off most of Russia's energy exports it would be a major shock to global markets," said BofA chief economist Ethan Harris.
According to him, the loss of Russia's 5 million barrels may double oil prices to $200 per barrel, resulting in inferior global economic development.
And it's not just oil: commodity prices are off to their best start since 1915, according to the Bank of America. Last week, nickel surged by 19 per cent, aluminium by 15 per cent, zinc by 12 per cent, and copper by 8 per cent, while wheat futures increased by 60 per cent and maize by 15 per cent.
With annual growth in the US expected to hit a stratospheric 7.9 percent this week, and the core measure at 6.4 per cent, this will just add to the global inflationary pulse.
All of this complicates the European Central Bank's policy outlook when it meets this week.
"Given the potential for stagflation is very real, the ECB is likely to maintain maximum flexibility with its asset purchase program at 20 billion euros through Q2 and potentially beyond, thus effectively pushing out the timing of rate hikes," said Tapas Strickland, an economist at NAB.
"Higher CPI forecasts, though, mean rate hikes will be needed on the horizon."