Oil prices rose above $100 per barrel, shares in Asia tumbled and European stock futures dove after Russia’s president Vladimir Putin ordered a “special military operation” in eastern Ukraine.
Hong Kong’s benchmark Hang Seng index dropped more than 3 per cent on Thursday, South Korea’s Kospi fell 2.7 per cent and Japan’s Topix was down 2 per cent. China’s CSI 300 index of Shanghai- and Shenzhen-listed shares fell 1.3 per cent.
Futures pointed to heavy losses for European shares, with the Euro Stoxx 50 set to drop more than 3 per cent at the open while the FTSE 100 was expected to fall 2.5 per cent.
The S&P 500 was tipped to fall another 2 per cent after closing Wednesday’s session sharply lower, while the Nasdaq was expected to fall almost 3 per cent, priming the tech-focused benchmark to drop more than 20 per cent from its most recent peak and into a bear market.
In commodities markets, Brent crude, the international benchmark, rose as much as 4.7 per cent to more than $101 a barrel on fears that war in eastern Europe could disrupt supply chains, the first time it has crossed the $100 threshold since 2014, when Russia annexed Crimea. West Texas Intermediate, the US marker, climbed 4.7 per cent to $96.44.
“If this situation continues to deteriorate I wouldn’t be surprised to see Brent at $120 a barrel, and that is really the point you’d expect to see co-ordinated intervention [by global suppliers],” said Robert Rennie, global head of market strategy at Westpac.
In currency markets, the military operation spurred a sell-off in the Russian rouble, which sank 4.5 per cent to Rbs85.36 dollar, the lowest level since 2016, according to Bloomberg data. The euro also fell almost 1 per cent against the greenback to $1.1212.
Investors seeking refuge from share price falls piled into sovereign bond markets, driving down yields. The yield on 10-year US Treasuries fell 0.12 percentage points to 1.873 per cent. Gold also rose as a rally for havens sent the precious metal almost 2 per cent higher to more than $1,942 per troy ounce.
The market ructions in Asia came after Putin said he had ordered a military operation in Ukraine’s Donbas region and demanded that Kyiv’s army lay down its arms.
“All responsibility for the possible bloodshed will be fully and completely on the conscience of the ruling regime,” he said in an address broadcast on Russian state television. Putin also warned other countries against “the temptation of meddling in the ongoing events”.
The lead-up to war in Ukraine had rattled global markets, as the US warned that Russia could launch a full invasion. Kyiv declared a state of emergency after the Kremlin said two Moscow-backed separatist territories in Ukraine had asked Putin to “repel the aggression of the Ukrainian regime”.
The White House said the request was an example of the kind of “false flag” operations that Russia’s president was using to create the pretext for a large invasion. The Pentagon warned that Moscow had deployed 100 per cent of the forces needed for an attack.
Russian stocks have plunged in response to the crisis. On Monday, the Moex index fell by as much as 14.2 per cent, closing the main trading session in the biggest one-day fall since Russia seized Crimea in 2014. The benchmark is down more than 18 per cent this year.