Global stocks slide and oil jumps as Putin puts Russia on war footing

Global stocks dropped sharply and oil and natural gas prices rallied on Tuesday, after Vladimir Putin ordered Russian troops into Ukraine.

Europe’s regional Stoxx 600 share gauge fell 1.6 per cent in early dealings. In London, the FTSE 100 lost 1.4 per cent. Futures contracts tracking the US benchmark S&P 500 fell 1.8 per cent, while those tracking the tech-heavy Nasdaq 100 gauge fell 2.6 per cent.

This came after heavy losses for stock markets across Asia, with Hong Kong’s benchmark Hang Seng index down almost 3 per cent, as the Russian president put the country on a war footing, forestalling attempts to find a diplomatic solution to the crisis.

“After the recent developments, the situation appears more alarming, and markets may start to price in a material risk of a fully-fledged invasion of Ukraine,” wrote analysts at ING, “as well as its consequences for the global geopolitical and economic equilibrium.”

“With this in mind — and acknowledging the high volatility and unpredictability of the situation — we think upside risks should prevail for safe-haven currencies”, the analysts continued, pointing to the US dollar, the Japanese yen and the Swiss franc. The dollar index, which measures the currency against six others, added 0.1 per cent on Tuesday.

Russia’s rouble meanwhile hit its weakest level against the dollar in more than 15 months at 80.7. The Moex index of Russian stocks, which had closed 10.5 per cent lower on Monday, fell as much 9 per cent in morning trade and was recently down almost 5 per cent.

Brent crude, the international oil benchmark, rose as much as 2.6 per cent to $97.83 a barrel as traders calculated the possibility of sanctions against Russia, a major producer of the commodity as well as other natural resources. European natural gas contracts for next-month delivery jumped 7 per cent to €78.5 per megawatt hour.

“In the short term, we’re simply going to be trading the headlines,” said Robert Rennie, global head of market strategy at Sydney-based Westpac. “Obviously the headlines have taken a very ominous turn in the last few hours.”

Tokyo’s Nikkei 225 share index fell 1.7 per cent, South Korea’s Kospi lost 1.4 per cent and mainland China’s CSI 300 fell 1.3 per cent.

In government debt markets, the yield on the 10-year US Treasury note fell 0.07 percentage points to 1.87 per cent, reflecting a significant rise in price for the benchmark debt instrument as traders sought shelter from equity market volatility.

Moscow on Monday said it had destroyed Ukrainian military vehicles that entered Russian territory and Putin agreed to recognise two Moscow-backed separatist regions in eastern Ukraine.

US secretary of state Antony Blinken said Putin’s decision to recognise the Russian-backed Donetsk and Luhansk people’s republics as independent was a “clear attack” on Ukraine’s sovereignty. A senior US official warned on Monday that a Russian invasion of Ukraine could be launched as early as in the “coming hours”.

The UK is expected to announce sanctions against Russia on Tuesday. Foreign secretary Liz Truss said the measures would be imposed in response to Moscow’s “breach of international law and attack on Ukraine’s sovereignty and territorial integrity”.

The crisis in Ukraine has stoked volatility in global markets in recent weeks, driving up energy prices on concerns that supply chains could face severe disruption in the event of a conflict. Analysts at JPMorgan have estimated oil could hit $120 a barrel in the coming weeks if the crisis in Ukraine worsened.