As the conflict between Russia and Ukraine escalates, U.S. and EU leaders consider banning Russian oil and gas imports, which could risk stagflation – a period of slow economic growth – for the global economy. We saw signs of this as the EU stocks began to close due to the impending risk of stagflation throughout the economy.
European stocks fell following the announcement, including the pan-European 600 Stoxx, which closed down 1.1%, paring back some of its earlier losses.
The continental benchmark also faced its worse week since the start of the pandemic in March 2020 and lost 7%.
U.S. Secretary of State Antony Blinken told NBC that Washington was in great discourse with high-ranking EU leaders about banning Russian oil and natural gas imports to try to offset effects.
While the EU is still looking to seek energy independence from Russia, President Biden announced that the United States is banning all Russian oil and gas and energy imports.
The President has stated that they are continuing forward with the ban in place, with the knowledge that many in the U.S. allies list may not be in a position to join in. After all, the U.S. is a natural oil producer, producing more on a domestic basis than all other EU allies together.
Russia continues to ramp up its assault on Ukraine, but its assaults are met with fierce Ukrainian resistance.
Western leaders have already imposed economic sanctions on Russia to try and isolate them from the global economy. Still, the Kremlin continues its invasion, prompting Ukrainian President Volodymyr Zelenskyy to urge Nato to declare Ukraine as a no-fly zone without success.
The effects of Russian sanctions are already affecting the global economy, causing stock prices to fall and oil prices to skyrocket. As a result, shares in Asia-Pacific closed sharply lower on Monday, with Hong Kong’s Hang Sen index dropping almost 4% to regional losses. On Wall Street, the major U.S. averages sunk due to stagnation fears.
After the announcement, Anglo-Russian miner Polymetal International shares were up by 32%. However, the London Stock Exchange quickly canceled shares with Polymetal International due to the high share price.
Talks between Ukraine and Russia and China’s ongoing COVID-19 concerns caused U.S. oil prices to tumble by 8%. Late February, oil surged above $100, but now WTI reportedly traded as high as $130.50 last week.
UK consumers are also subject to high oil prices amidst Russia’s economic sanctions, and the cost to fill up a 55-liter family car has gone up by £2 a week.
Luca Paolini, the Chief Strategist at Pictet Asset Management, commented on consumer fears of economic decline and the impact that this could have on gas markets. She believes that the EU is already in a recession, as consumers will be loathed to spend savings when there’s a war on the horizon, even without the risk of stagflation.
