Oil and gold led a broad rally in global commodities after Russian President Vladimir Putin announced that he’s recognizing two self-proclaimed separatist republics in eastern Ukraine and plans to send “peacekeeping forces” to the region in a dramatic escalation of the conflict.
Brent is trading above $96 a barrel while West Texas Intermediate, the US benchmark crude climbed about 3% from Friday, after not closing Monday due to a U.S. holiday, while gold touched an eight-month high.
Brent for April advanced 1.3% to $96.67 on the ICE Futures Europe exchange after closing 2% higher on Monday.
There were no details on how many Russian troops might go in, or when. Moscow has previously accused Ukraine of having a significant deployment of its own soldiers on the line of contact with the separatists in Donetsk and Luhansk.
The intensifying standoff — and the response from the U.S. and Europe — has the potential to roil raw materials markets.
Russia is a major producer of oil, gas, aluminum and wheat, which Ukraine also grows. Russian aluminum company United Co. Rusal International PJSC tumbled more than 20% in Hong Kong amid nervousness over possible sanctions.
The intensifying standoff — and the response from the U.S. and Europe — has the potential to roil raw materials markets.
Russia is a major producer of oil, gas, aluminum and wheat, which Ukraine also grows. Russian aluminum company United Co. Rusal International PJSC tumbled more than 20% in Hong Kong amid nervousness over possible sanctions.
The White House plans to announce new sanctions Tuesday in response to Russian actions on Ukraine, according to a Biden administration official. The U.S. is moving all State Department personnel and its embassy out of Ukraine and into Poland citing security reasons.
Gold has benefited from its role as a haven in times of geopolitical turmoil, as risks are “outweighing worries about the Fed tightening”, said Margaret Yang, a strategist at DailyFX. Meanwhile, cryptocurrencies tumbled, undermining the argument that they can fulfill a similar role.
Aluminum surged to the highest intraday level in more than 13 years, as the Ukraine tensions added to supply risks in a market already grappling with production pressures and growing demand.
Prices rose as much as 1.9% to $3,342 a ton on the London Metal Exchange, and are closing in on an all-time record. Nickel surged as much as 1.4% to $24,700, the highest since 2011.
Chicago wheat futures jumped to a near one-month high as trading resumed after a U.S. holiday. Russia and Ukraine account for a quarter of global trade in the grain and a fifth of corn sales.
There’s concern that an escalation could disrupt Black Sea shipments at a time when world food costs are already at a decade high.
Palm oil rocketed to a fresh record in Malaysia, hitting 5,799 ringgit ($1,386) a ton, on concern the global vegetable oils market would tighten further. Russia and Ukraine make up 80% of global sunflower oil exports.
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Oil was boosted Monday after Saudi Aramco said it sees signs that demand is rising, especially in Asia.
Several of OPEC+’s biggest producers want the group to continue with its strategy and add another 400,000 barrels a day of crude to the market in April, according to people familiar with the matter. That comes despite calls for OPEC+ to increase output faster amid tight supplies.
“Ukraine is going to dominate the volatility in short term market moves this week,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte. “If it continues to deteriorate then we can see Brent crude above $100 by the end of the week, if not before.”
