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 high, 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.
Russia is a major exporter of energy products, 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 the price had climbed as high as $139. Oil has soared about 26 percent in price over the past week as the conflict has intensified.
Some analysts say Russia’s attack on Ukraine is likely to have long-lasting implications for commodities markets. 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.
And, as analysts at Citigroup wrote recently, this geopolitical turmoil is occurring while many nations have committed to “undo” energy habits involving fossil fuels in order to tackle climate change.
The bipartisan push by lawmakers to cut off oil imports adds to pressure on President Biden to shut the spigot. On Sunday, Secretary of State Antony J. Blinken added to expectations during his recent tour of countries near Ukraine that some sort of embargo was in the works.
“We are now in very active discussions with our European partners about banning the import of Russian oil to our countries while, of course, at the same time, maintaining a steady global supply of oil,” Mr. Blinken said on Sunday on “Meet the Press” on NBC.
A precipitous drop in oil and natural gas supplies from Russia would create major problems for both industrial users and consumers. Cutting off Russian oil would force many refineries that normally process it to find other sources.
Although oil is a relatively flexible commodity, there are many grades of crude, and a refiner cannot always substitute one for another. Washington’s sanctions on Venezuelan crude, for instance, led refiners in the United States to buy more Russian oil as a substitute, raising import levels. On Saturday, Shell, Europe’s largest oil company, said it had bought Russian crude oil because supplies from “alternative sources would not have arrived in time to avoid disruptions to market supply.”
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 on Monday: $4.06 a gallon, according to AAA, up 45 cents from a week 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 the war’s financial fallout is hitting Europe the hardest. Natural gas is less flexible than oil, and Europe is much more dependent on it as a fuel. Prices for natural gas in Europe 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.
“It is so expensive that you are going to drive utilities into steep losses,” said Henning Gloystein, a director at the Eurasia Group, a political risk firm.
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.
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.
March 7, 2022
An earlier version of this article and a news alert that accompanied it misstated the last time the S&P 500 fell more than it did on Monday. It was in October 2020, not May 2020.