Oil prices are at a seven-year high.
Tetra Images – Dan Bannister/Getty Images
- US futures rose after stocks fell sharply Tuesday, while oil surged past $110 on the back of the Ukraine conflict.
- Despite the rise in stocks, analysts said many investors were nervous that the Ukraine war and oil prices could damage global growth.
- Bond yields fell dramatically Tuesday as investors rushed towards the safe-haven assets and downgraded their forecasts for Fed rate hikes.
US futures rose on Wednesday after stocks dropped sharply the previous day, but investors remained wary as oil surged past $110 on the back of the Russia-Ukraine conflict.
S&P 500 futures were 0.78% higher at 5.33 a.m. ET after earlier slipping into the red, following a 1.55% fall in the benchmark US stock index Tuesday. Dow Jones futures rose 0.72%, and Nasdaq 100 futures were up 0.81%.
Europe’s continent-wide Stoxx 600 index rose 0.27% after sliding 2.4% Tuesday. The UK’s FTSE 100 rebounded 0.9%, thanks in part to the energy companies that dominate the index. Asian stocks fell overnight, with China’s CSI 300 down 0.89%.
Brent crude oil rose sharply for a second day, and was up 5.59% to $110.84 a barrel, its highest level in seven years. WTI crude, the US benchmark price, rose 5.52% to $109.12 a barrel.
Russian President Vladimir Putin’s invasion of Ukraine has threatened to light a fire under global oil prices, given Russia’s importance as an energy supplier.
As prices surged Wednesday, Putin’s army prepared to push into Ukraine’s biggest cities in what is likely to become a bloody phase of the war. Russia stepped up its bombardment of Kharkiv, Ukraine’s second biggest city, having killed numerous civilians in its assault Tuesday.
The International Energy Agency agreed to release 60 million barrels of oil from emergency reserves, but the move did little to quell the sharp price rises.
“The situation in energy markets is very serious and demands our full attention,” IEA executive director Fatih Birol said in a statement. “Global energy security is under threat, putting the world economy at risk during a fragile stage of the recovery.”
Soaring oil prices were unnerving some investors, despite the rise in US futures, analysts said. Many strategists have cautioned that the Russia-Ukraine conflict could send commodities prices skyrocketing, pushing inflation — already at its strongest in 40 years — even higher.
Read more: The strategist who wrote the book on geopolitical alpha lays out 2 key developments to watch amid Russia’s invasion of Ukraine — and shares 3 flight-to-safety trades
US President Joe Biden pledged to get a grip on red-hot price rises in his State of the Union speech Tuesday. He said inflation is “robbing” Americans of wage gains, “that’s why my top priority is getting prices under control.”
Biden also called Putin a dictator and said the US would close its airspace to Russian planes. His speech came after the US and its allies moved to cut select Russian banks out of a key global payments system called SWIFT and to hinder the central bank’s ability to get round sanctions by using its reserves.
Russia’s stock market remained closed for a third day Wednesday. The ruble, the country’s currency, traded at around record lows. One dollar bought 113 rubles Wednesday, a sharp decline from the start of the year when a dollar fetched around 75.
Bond markets reflected the fear among investors, with prices soaring as traders stampeded towards safe-haven assets.
The yield on the key 10-year US Treasury note rebounded 2 basis points to 1.745% Wednesday morning, having plunged on Tuesday after opening at 1.867%. Yields move inversely to prices.
“‘Anxiety is again rippling through global financial markets with the fear of stagflation taking hold, as the Ukraine conflict ratchets up inflationary pressures and threatens to derail global growth,” said Susannah Streeter, senior markets analyst at Hargreaves Lansdown.
Federal Reserve Chair Jerome Powell was due to speak before Congress Wednesday, as traders dialed back their bets on how much the central bank would hike interest rates in 2022.
Read the original article on Business Insider 
