Stocks Weigh Historic U.S. Ban On Russian Energy, Oil Nears $130 Per Barrel

Topline

Stocks opened slightly lower on Tuesday—adding to this week’s losses after the market’s worst day since 2020—as investors remain concerned that surging energy prices could result in slower U.S. economic growth, with the Biden administration readying a new ban on Russian oil imports.

Key Facts

The Dow Jones Industrial Average fell 0.3%, around 100 points, while the S&P 500 lost 0.5% and the tech-heavy Nasdaq Composite 0.7%.

Tuesday’s moves follow a steep sell-off on Wall Street a day earlier, in which the S&P 500 plunged nearly 3%—its biggest drop since 2020—the Dow tumbled 800 points and the Nasdaq lost 3.6%, putting the index into bear market territory.

Surging commodity prices—including everything from oil, natural gas and precious metals—have surged in recent weeks due to the ongoing conflict between Russia-Ukraine, with experts now worrying that could lead to a slowdown in global economic growth.

In the U.S. markets especially, investors have become increasingly risk-averse, turning to safe haven assets like Gold amid fears that soaring energy prices will exacerbate already high levels of inflation, which remains at 40-year highs.

Oil prices continued to skyrocket Tuesday amid news that the Biden administration is preparing to announce a ban on Russian oil imports in response to the country’s actions in Ukraine: U.S. benchmark West Texas Intermediate now sits at $127 per barrel, while global benchmark Brent crude is trading at around $131 per barrel.

Russia, for its part, has warned that oil prices could surge to around $300 per barrel if the West proceeds with a ban on its energy exports: “A rejection of Russian oil would lead to catastrophic consequences for the global market,” Deputy Prime Minister Alexander Novak said Monday.

Crucial Quote:

“Surging commodity prices continue to add to worry that economic growth prospects will take a big hit as the Ukraine uncertainty persists,” says Edward Moya, senior market analyst at Oanda. “It seems the fundamental shift due to Russia’s invasion of Ukraine is that inflationary pressures will remain elevated much longer than expected and that ultimately the economy will fall into a recession at some point over the next 24 months.”

What To Watch For:

President Joe Biden is expected to formally announce a new ban on Russian coal, natural gas and oil imports later on Tuesday morning. While Russia accounted for just 3% of U.S. oil imports last year, it also made up 21% of America’s gasoline imports in 2021. With commodity prices surging even higher on the news, U.S. gas prices hit a new all-time high price of more than $4.17 per gallon on Tuesday, according to AAA data.

Further Reading:

Dow Falls 800 Points With No End In Sight For Russia’s Invasion Of Ukraine (Forbes)

Dow Hits Fourth Week Of Losses, Oil Nears $120 Per Barrel As Russia’s Invasion Of Ukraine Continues (Forbes)

War Stocks Are Surging As Russia-Ukraine Conflict Rages On: Lockheed Martin, Northrop Up 20% (Forbes)

Wheat Prices Surge Amid Russia’s Invasion Of Ukraine—Here’s What That Means For U.S. Food Costs (Forbes)