Global stocks slid and energy prices jumped on Monday as attacks on Ukraine escalated and governments considered ever-stricter economic penalties on Russia, including cutting off imports of Russian oil. It was Wall Street’s worst day in more than a year.
The S&P 500 fell 3 percent, its sharpest daily decline since October 2020. The Nasdaq composite dropped 3.6 percent and is now 20 percent off its November record, entering territory known on Wall Street as a bear market, denoting a serious downturn.
Aside from the shock and uncertainty of the war, the conflict has increased concerns about prolonged inflation worldwide, and as stocks slid on Monday, energy prices jumped.
Russia is a major exporter of oil and natural gas, providing 10 percent of the world’s oil and 40 percent of Europe’s natural gas. American lawmakers pushed on Monday for a ban on imports of Russian energy into the United States. There were also calls to suspend normal trade relations with Russia and Belarus in response to the invasion of Ukraine.
Brent crude, the global benchmark, ended Monday up about 4.3 percent to $123.21 a barrel, but earlier it had climbed as high as $139 a barrel. The price of oil has soared about 26 percent over the past week as the conflict has intensified.
In addition to energy, Russia is a big producer of staples like wheat, aluminum and palladium, which is used in cars and phones — and prices of those commodities have also been soaring.
Investors had already been nervous about inflation, which has been the highest in decades in the United States and Europe after the pandemic shut factories and left supply chains snarled. Economists expect the Consumer Price Index to show on Thursday that prices in the United States rose 7.9 percent in the year through February. And that reading was taken before the effects of the war were really starting to be felt. Gas prices, for example, rose to their highest level in the United States since 2008: $4.06 a gallon according to AAA on Monday, up 62 cents from a month ago.
Central banks have started to move aggressively to raise interest rates as they shift their focus from supporting economic growth to combating inflation. The end of easy money and the lure of higher rates — which make riskier investments less attractive — had already caused stocks to decline even before Russia’s invasion.
But it is Europe that has been feeling the financial impact of the war the hardest. Prices for natural gas in Europe, much of which comes from Russia, were already many times what they were a year ago and have been spiraling even higher, touching 345 euros per megawatt-hour on Monday before paring back to €215, an 11.7 percent gain.
The Stoxx Europe 600 fell 1.1 percent and ended Monday down more than 15 percent since its high on Jan. 5. The DAX index in Germany fell 2 percent, putting it in bear market territory.
“Amid grave uncertainty, European risk markets have every reason to sell off,” Holger Schmieding, the chief economist at the German bank Berenberg, wrote in a note on Monday. But, he said that “a genuine financial crisis seems unlikely in the advanced world.”
“Fear can beget fear. But as in the case of previous severe shocks, markets should eventually look through the dramatic near-term event risks,” he said, adding: “Of course, we may first need a better idea of how the situation will evolve and how far energy, food and raw material prices may surge before risk markets can turn up again for good.”
The S&P 500 is 12.4 percent off its January record. The energy sector, which is up about 35 percent since the start of the year, is the only part of the S&P 500 that has not fallen this year. Big tech stocks, which make up a large portion of the Nasdaq and also weigh heavily on the S&P 500, have been hit particularly hard by uncertainty about the future of U.S. interest rates.
Coral Murphy Marcos and Stephen Gandel contributed reporting.
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