Dow Falls 600 Points, Oil Prices Surge As Russia-Ukraine Conflict Continues To Roil Markets

jav
March 1, 2022
7:36 pm

https://ift.tt/2eSAHFl

Topline

The stock market plunged on Tuesday—with the Dow Jones Industrial Average falling roughly 600 points, while oil prices surged to new seven-year highs as Russia escalated its attacks on several Ukrainian cities and a huge military convoy closed in on the capital city of Kyiv.

Smoke rises from a military airport near the Ukrainian city of Kharkiv.

Aris Messinis/AFP via Getty Images

Key Facts

The Dow Jones Industrial Average fell 1.8%, around 600 points, while the S&P 500 lost 1.5% and the tech-heavy Nasdaq Composite 1.3%.

Stocks declined sharply on Tuesday as heavy fighting continued in Ukraine, with Russia scaling up its bombardments of several cities and sending a vast military convoy that stretched over 40 miles to close in on the capital city of Kyiv.

While officials from both sides met for talks on Monday, Ukrainian President Volodymyr Zelensky said on Tuesday that Russia must stop bombing Ukrainian cities before additional ceasefire negotiations can take place.

Energy prices surged higher amid the ongoing conflict: U.S. oil benchmark West Texas Intermediate crude jumped nearly 10% to around $105 per barrel on Tuesday, its highest level since July 2014, while international benchmark Brent crude gained 8.6% to trade at more than $106 per barrel.

The United States and Western allies have unleashed severe economic sanctions against Russia for its military aggression, but most countries (with the exception of Canada) have so far stopped short of targeting the country’s energy industry.

Ongoing uncertainty around Western sanctions on Russia also pushed financial stocks lower, with shares of Bank of America falling 5%, Wells Fargo 6% and Charles Schwab over 9%.

Crucial Quotes:

“Stocks are mostly for sale,” and with uncertainty around the Russia-Ukraine conflict remaining “the primary theme” in markets, “there still isn’t enough clarity for stocks to feel comfortable stabilizing,” says Adam Crisafulli, founder of Vital Knowledge. Though the two sides are set to talk again on Wednesday, Russia is “persisting (and intensifying) its assault while the global community tightens the financial noose tighter around Moscow’s neck, causing oil to climb even further.”

Key Background:

Stocks took a beating in February—with all three major indexes declining 3% or more—as geopolitical tensions between Russia and Ukraine weighed on markets. The benchmark S&P 500 is now down more than 10% so far in 2022. The Dow is down just over 9% this year, while the tech-heavy Nasdaq has fallen nearly 15%. Bitcoin and gold prices, meanwhile, have been rising recently as investors turn to safe-haven assets.

What To Watch For:

Surging energy prices, as more experts warn that oil could stay above $100 per barrel if Russian energy exports are disrupted. “If Russia continues to oppress Ukraine, it’s very likely that the world won’t be using Russian energy anymore,” says Charles Lemonides, founder and chief investment officer of ValueWorks. “There’s going to be an unwillingness to do business with Russia for a long time to come,” he says, pointing to the fact that companies like BP and Shell have already abandoned operations in Russia.

Contra:

“Seeing the first two months of a new year in the red isn’t a great feeling, but the good news is lately it hasn’t been a major warning sign,” according to Ryan Detrick, chief market strategist for LPL Financial. “The first two months of 2016 and 2020 were both negative, but stocks were able to claw back and finish higher those years.”