🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Oil Up, Investors Brace for Potential Stagflationary Shock

Published 03/07/2022, 12:15 AM
Updated 03/07/2022, 12:18 AM
© Reuters.

By Gina Lee

Investing.com – Oil was up on Monday morning in Asia, while shares plummeted in frantic trading. Investors reacted to the risk of a U.S. and European ban on Russian products and delays in Iranian talks, triggering a potential major stagflationary shock in global markets.

Brent oil futures soared 10.43% to $130.43 by 12:14 AM ET (5:14 AM GMT) after climbing as high as 18% in early, volatile trading. They were further boosted by the potential ban of Russian oil by the U.S. and Europe. WTI futures jumped 9.28% to $126.39.

The euro continued its fall, hitting parity against the Swiss franc, while commodities gained as the Russian invasion of Ukraine continues. Asia Pacific shares were also a sea of red on Monday.

"If the West cuts off most of Russia's energy exports it would be a major shock to global markets," BofA chief economist Ethan Harris told Reuters.

The loss of Russia's 5 million barrels could see oil prices double to $200 a barrel and lower economic growth globally, he added.

Oil is not the only commodity to be on the rise, with commodity prices recording their strongest start to any year since 1915, according to BofA. This will only exacerbate global inflation, with investors awaiting the U.S. consumer price index later in the week.

This could also pose a headache for the European Central Bank (ECB) when it hands down its policy decision later in the week.

"Given the potential for stagflation is very real, the ECB is likely to maintain maximum flexibility with its asset purchase program at EUR20 billion through the second quarter and potentially beyond, thus effectively pushing out the timing of interest rate hikes," NAB economist Tapas Strickland told Reuters.

"Higher consumer price index forecasts, though, mean interest rate hikes will be needed on the horizon,” he warned.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.