Written by Stan Cho
NEW YORK (AP) – Shares are falling on Wall Street on Monday as another big jump in oil prices threatens to squeeze inflation into the world economy.
The S&P 500 fell 2.3% after a barrel of US oil rose to $ 130 overnight due to the possibility of the US banning imports from Russia. Shares around the world fell even more sharply earlier that day, also driven by oil movements, although their losses declined as oil fell to $ 120 a barrel.
The Dow Jones industrial average fell 628 points, or 1.9 percent, to 32,986 as of 12:19 a.m. Eastern Time, and the Nasdaq was down 2.2 percent. The shares are at the rate of the worst losses since Russia’s invasion of Ukraine.
Gold and the measure of nervousness on Wall Street were also higher, though not as strongly as when oil prices peaked. The price of gold briefly reached $ 2,007.50 an ounce before trading by $ 1,987.50, up 1.1%.
Oil prices have risen recently due to fears that Russia’s invasion of Ukraine will hamper already limited supplies. Russia is one of the world’s largest energy producers, and oil prices were high even before the attack because the global economy is demanding more fuel after a shutdown caused by a coronavirus.
Speaker of the House of Representatives Nancy Pelosi said in a letter to her colleagues on Sunday that “the House of Representatives is currently studying strong legislation” to further isolate Russia because of its attack on Ukraine. This could include a ban on imports of Russian oil and energy products, she said.
This is a major step that the U.S. government has not yet taken, despite a long list of steps to punish Russia, as the White House said it hopes to limit disruptions in oil markets. It wants to limit the price jumps for the petrol pump.
Reports also say U.S. officials may be considering easing sanctions against Venezuela. This could potentially release more crude oil and ease concerns about cuts to supplies from Russia.
A gallon of regular is already worth an average of $ 4,065 a gallon after breaking the $ 4 barrier on Sunday for the first time since 2008. A month ago, according to the AAA, the average per gallon was $ 3,441.
A barrel of U.S. oil traded at $ 117.85 a barrel, up 1.8%, after previously reaching $ 130.50. Brent crude, an international standard, rose 3.6% to $ 122.34 a barrel after hitting $ 139.
World markets have recently been troubled by concerns about how high prices for oil, wheat and other goods produced in the region will be, due to the Russian invasion, which is causing already high inflation in the world. In the United States, consumer prices jumped last month from a year ago at the fastest pace in four decades.
The conflict in Ukraine also threatens food supplies in some regions, including Europe, Africa and Asia, which rely on the vast fertile lands of the Black Sea region known as the “breadbasket of the world”.
The war is putting additional pressure on central banks around the world, and the Federal Reserve is set to raise interest rates later this month, for the first time since 2018. Higher rates are slowing the economy, which will hopefully help curb high inflation. But if the Fed raises rates too high, it risks forcing the economy to enter a recession.
Some investors have seen that the war in Ukraine would potentially push the Fed to ease rate hikes. Investors love low rates because they tend to raise stock prices and all kinds of markets.
But this time it may not be necessary, Goldman Sachs economists wrote in a report. As prices for oil, wheat and other commodities may rise even more, the threat of sustained high inflation in the economy will be higher. This could overturn the Fed’s traditional textbook.
“After decades of economic, financial or political turmoil invariably leading to falling interest rates, markets may have to re-learn, which may be the other way around,” wrote Goldman Sachs economist Jan Hatzius.
In addition to sanctions imposed on Russia by governments over its invasion of Ukraine, companies are also imposing their own penalties. The list of companies leaving Russia has increased to include Mastercard, Visa and American Express, as well as Netflix.
The value of the Russian ruble continued to decline amid all the financial pressure, falling another 20%. It fell below 0.7 cents.
“The conflict between Ukraine and Russia will continue to dominate market sentiment, and so far no signs of resolving the conflict are likely to limit risk sentiment in the new week,” said Yep Jun Rong, IG’s market strategist in Singapore.
“It should be clear already now that economic sanctions will not deter any aggression by the Russians, but will rather serve as a punishment due to the consequences for the growth of the world economy. Rising oil prices could pose a threat to firm margins and consumer spending forecasts, ”Yip said.
On Wall Street, shares of Bed Bath & Beyond soared after billionaire investment firm Ryan Cohen acquired nearly 10% of the company’s shares and recommended big changes. Cohen is a co-founder of Chewy, and after he took a stake in GameStop, a video game network that eventually named him chairman, he acquired a certain cult.
Shares of Bed Bath & Beyond jumped 31.1% to $ 21.18.
Yields on treasury facing rose, with 10-year yields rising to 1.74% from 1.72% on Friday at the end.
AP Business Writers Damian J. Trois and Yuri Kageyama contributed.