Oil prices spike above $120 a barrel; stocks slide as US weighs embargo on Russian crude

The possibility of further disruption to energy markets, along with broader uncertainty surrounding the conflict, has led many investors to leave growth opportunities in favor of safe havens, analysts say. The resultant buying and selling has hurt stocks and boosted things like gold, and government bonds.

Investors are afraid that rising oil prices could supercharge inflation, eating away at consumers’ pocketbooks and businesses’ balance sheets, effectively throwing a wet blanket over the economy.

Rising oil prices “are contributing to investors’ concerns that what could have been a transitory rate of inflation might be sticking around longer than anyone anticipated,” said Wayne Wicker of MissionSquare retirement. “Growth could be severely impacted.”

Oil prices reached their highest point in more than a decade on Monday as it appeared increasingly likely that international sanctions would not spare Russia’s energy industry. Brent crude, the international benchmark, was trading up 3.7 percent to $122.50 a barrel after having swelled past $130. West Texas Intermediate, the US oil benchmark, was up 1.8 percent, at $117.70.

Oil prices have increased more than six-fold since their early-pandemic low point. Not since the 2008 financial crisis have oil prices been higher.

The upward march in oil prices has already inflated what drivers in the US pay at the pump. The national average gas price stood at $4 per gallon Monday morning, up 40 cents over the past week.

US officials are looking for ways to take the pressure off global energy markets, although analysts warn there is no supplier that could easily supplant Russia. Negotiators from the US, Russia and China have been working on a renewed Iran nuclear deal that could return Iranian crude oil to the markets. And a group of senior US officials flew to Venezuela on Saturday to discuss that nation’s oil exports, The Washington Post reported.

Fears of a possible energy crisis could bring a volatile week for the stock market. Prices are likely to continue fluctuating until there is explicit ban from the United States or Europe, said Raymond James analyst Pavel Molchanov. And some investors appear to be speculating on the increase in prices; Warren Buffett’s Berkshire Hathaway has staked $5 billion in the oil company Occidental Petroleum, according to an SEC filing.

“The embargo possibility on Russian oil coming from the Beltway is a shot across the bow move that will put further upward pressure on gas prices and worries about the ripple impact with inflation and the economy,” said Wedbush managing director Dan Ives.

The conflict’s unpredictability has investors on edge. Cboe’s volatility index, known as Wall Street’s “fear gauge,” jumped 7.9 percent Monday; it’s climbed almost 100 percent since the beginning of the year.

Investors appear to be fleeing to safety, Ives said, and high-risk, high-reward assets like tech stocks are suffering as a result. The Dow Jones industrial average was down roughly 680 points, or about 2 percent by noon. The tech-heavy Nasdaq and the broader S&P 500 both dumped 2.3 percent.

“Markets don’t like uncertainty and the ambiguity of the current environment is sure to give investors pause for the foreseeable future,” said Brian Pace, head of investment management at Commonwealth Financial Network.

Global markets also took a hit on Monday, with Germany’s DAX and France’s CAC 40 falling 2 percent and 1.3 percent, respectively, and the benchmark Stoxx 600 index down 0.9 percent. In Hong Kong, the Hang Seng Index tanked 3.9 percent and Japan’s Nikkei erased 2.9 percent.

Investors flocked to so-called safe haven assets like gold, which jumped almost 1 percent. Government bonds, another safe haven, were also boosted Monday morning. The yield on the 10-year Treasury note rose slightly to 1.741 percent. (Bond yields move inversely to prices)

Alyssa Fowers contributed to this story.

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