New York (AP) — Oil prices surged Tuesday as investors steered money toward safer assets such as U.S. Treasury bonds, while Russia presses ahead with its invasion of Ukraine.
Stock prices fell again as investors try to determine the economic impact of the conflict. The S&P 500 was down 1.6% by midday, the Dow Jones Industrial Average shed 687 points (2%) to 33,204, and the tech-heavy Nasdaq slipped 1.5%.
The price of oil remains a major concern because Russia is one of the world’s leading producers. The recent price increases are feeding an inflationary trend that is eroding households’ purchasing power around the globe.
U.S. crude rose 10.6% to $105.82 a barrel, a level not seen since 2014. Brent crude, the international benchmark, climbed 9% to $106.82 a barrel.
The crisis in Ukraine prompted an extraordinary meeting of the International Energy Agency, where its 31 member countries agreed to release 60 million barrels of oil from their strategic reserves into the market.
The invasion of Ukraine is also driving inflation in agricultural commodities, which have been rising amid recent inflationary pressures. Prices for wheat and corn rose by more than 4%, and they have climbed about 20% thus far this year. Ukraine is a major exporter of both.
Investors continued to put money into bonds. The yield on the 10-year U.S. Treasury fell sharply from 1.83% to 1.71%, returning to where it stood in January. In February it briefly rose above 2% for the first time in more than two years.
The conflict in Ukraine has jolted global markets and heightened concerns about inflation and the plans by central banks to raise interest rates.
The United States and its allies have imposed severe economic sanctions on Russia, affecting the country’s financial system.
The Russian currency, the ruble, fell to a historic low on Monday after several Western governments moved to isolate Russia from the international payments system. Also on Monday, the U.S. Treasury Department announced additional sanctions against the Bank of Russia.
Several companies have announced plans to exit or scale back their investments in Russia. The Bank of Russia raised its key rate from 9.5% to 20% in a desperate bid to stabilize the ruble and avert a bank run. The Russian stock market remained closed on Tuesday.
Meanwhile, investors are awaiting the forthcoming decisions from the Federal Reserve and the U.S. government. Federal Reserve Chair Jerome Powell is set to testify before Congress this week, and that could shed light on his plans regarding interest rates.
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