European stocks moved between small gains and losses on Tuesday, while commodities remained volatile, as traders weighed the prospect of disruptions to global supply chains stoked by Russia’s invasion of Ukraine.
Natural gas prices in Europe rose as much as 33 per cent in early trading to €285 a megawatt hour, after Russia warned it could cut off supplies to the region in response to western sanctions. Futures linked to TTF, the region’s wholesale gas price, later fell back to about €207. A year ago, these contracts traded at about €16.
Prices of wheat and nickel also rose sharply as Russian forces intensified their shelling of Ukrainian cities and moved closer to the southern port of Odesa.
Russian deputy prime minister Alexander Novak on Monday said the nation, which supplies 40 per cent of Europe’s gas, had “every right” to “impose an embargo on gas pumping” in retaliation for Germany having frozen approvals of the Kremlin-backed Nordstream 2 pipeline. In comments on Russian state television, Novak also said plans by the US and Europe to consider banning Russian oil imports could send the price of Brent crude up to $300 a barrel.
“Given Russia’s key role in global energy supply, the global economy could soon be faced with one of the largest energy supply shocks ever,” Damien Courvalin, head of energy research at Goldman Sachs, said in a note to clients. “The uncertainty on how this conflict and oil shortages will be resolved is unprecedented.”
Brent crude oil, which climbed as high as $139 a barrel on Monday after US secretary of state Antony Blinken said Washington was in “very active discussions” with European allies over a ban on Russian oil, traded at about $130 on Tuesday.
Meanwhile, in equity markets, the regional Stoxx Europe 600 share gauge moved between small gains and losses, having closed lower in the previous three sessions. Futures contracts tracking the US’s S&P 500 benchmark traded flat, while those tracking the tech-heavy Nasdaq 100 inched lower.
Shares in Europe had tumbled since Russian president Vladimir Putin launched his invasion of Ukraine, not only because of fears of consumer price inflation caused by higher energy prices, but also because of concerns about the economic implications of potential industry shutdowns caused by shortages of commodities produced in Russia and Ukraine.
Gold rose 0.9 per cent to $2,014 a troy ounce. The haven asset had topped the $2,000 threshold in the previous session for the first time since August 2020.
Wheat futures rose as much as 5.4 per cent to $13.63 a bushel in early trading on Tuesday before pulling back to $13.29. Ukraine and Russia account for almost a third of global wheat exports.
The benchmark nickel contract surged to a record high above $100,000 a tonne on the London Metal Exchange, prompting the venue to halt trading as the “evolving situation in Russia and Ukraine” shakes up commodities markets.
Asia equity markets were mostly lower, with China’s benchmark CSI 300 index closing down 2 per cent and Japan’s Topix falling 1.9 per cent.
