Oil prices soared near $100 per barrel on Tuesday as Russia, the world’s largest crude producer, prepared to send troops into two Ukrainian breakaway regions, prompting Western nations to prepare economic sanctions against Moscow.

European stocks edged into positive territory after heavy losses at the open, as the Kremlin said it remained open to all diplomatic contact over Ukraine.

Earlier in the day, Asian stock markets had experienced significant losses.

Brent crude oil from the North Sea hit a seven-year high of $99.50 per barrel.

At 1115 GMT, it had pulled back to just below $98, but it was still up around 2.5 percent from late Monday.
“The intensifying crisis between Russia and Ukraine has raised concerns about the supply disruptions that would ensue as sanctions look set to cripple Russia, the world’s second largest oil exporter and the world’s top natural gas producer,” noted Victoria Scholar, head of investment at Interactive Investor.

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German Chancellor Olaf Scholz said he was suspending the Nord Stream 2 pipeline project with Russia in response to Moscow’s recognition of breakaway regions Donetsk and Lugansk.

Ukrainian President Volodymyr Zelensky had demanded an immediate halt to the project, set to pipe Russian natural gas to Germany via the Baltic Sea.

Zelensky said Russia must be punished for its recognition Monday of Ukraine’s two separatist-held regions with “immediate sanctions” that include “the complete stop of Nord Stream 2”.

It comes as the United States, Britain and the European Union prepared to launch economic sanctions on Russia.

“Our response will be in the form of sanctions, whose extent the ministers will decide,” EU foreign policy chief Josep Borrell said.
Russia’s recognition of the breakaway regions of Ukraine will meanwhile “strongly increase” economic uncertainty for the EU, the bloc’s economy commissioner Paolo Gentiloni said.

Russian troops were believed to be deploying into Donetsk and Lugansk in eastern Ukraine, after Russian President Vladimir Putin issued decrees ordering his army to assume “peacekeeping” functions in the separatist territories.

– Oil surge –

The jump in oil prices is compounding worries about inflation around the world, with the US Federal Reserve coming under intense pressure to tighten monetary policy to prevent prices running out of control.

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That has in turn battered equity markets in recent months, and the latest developments out of Europe led to another day of hefty selling on Tuesday.

Russia’s MOEX index plunged eight percent at the open, having lost 10 percent Monday.

The ruble though recovered after sharp losses against the dollar.

Haven investment gold climbed past $1,900 an ounce before pulling back.

Away from the Ukraine crisis, German auto giant Volkswagen on Tuesday said it was drawing up plans to list its luxury brand Porsche as it looks to raise the funds for its move to electric vehicles.

In London, HSBC bank announced bumper 2021 profits and plans to repurchase shares worth up to $1 billion as the Asia-focused bank continues its recovery from the coronavirus pandemic and major restructuring.
– Important figures around 11:15 a.m. GMT –

The FTSE 100 index in London is up 0.4 percent to 7,515.85 points.

FLAT at 14,731.73 on the Frankfurt DAX

CAC 40 in Paris is up 0.2 percent to 6,799.10.

At 3,993.82, the EURO STOXX 50 index is up 0.2 percent.

Nikkei 225 in Tokyo is down 1.7 percent at 26,449.61. (close)

The Hang Seng Index in Hong Kong is down 2.7 percent to 23,520.00. (close)

Shanghai Composite: 3,457.15 is down 1.0 percent (close)

The Dow Jones Industrial Average in New York is closed for a public holiday.

Brent North Sea crude is trading at $97.90 per barrel, up 2.6 percent.

West Texas Intermediate: $93.90 per barrel, up 4.1 percent.

Euro/dollar: Up from $1.1337 late Monday to $1.1358.

Pound/dollar: $1.3575, down from $1.3609

Euro to pound: 83.68 pence, up from 83.33 pence.

The dollar is gaining ground against the yen.

The UN announced on Tuesday that some of its non-essential staff and their families would be relocating to Ukraine, amid growing fears of a full-scale Russian invasion.

“We are committed to staying and delivering in Ukraine, particularly in eastern Ukraine,” Alessandra Vellucci, a UN spokeswoman, told reporters in Geneva.

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“We are still fully operational.”

“As a result of the evolving situation on the ground,” she acknowledged, “we have allowed for the temporary relocation of some non-essential staff and some dependents.”

Her remark came amid mounting outrage and concern over Russia’s recognition of two rebel republics in Ukraine on Monday, as well as its decision to send in Russian “peacekeepers.”

The recognition effectively buries the fragile peace process regulating the conflict in eastern Ukraine, known as the Minsk accords, and increased fears that the Kremlin is preparing a full-scale invasion.

The UN counts 1,510 staff members in Ukraine, including 149 international staff, Vellucci said.
In all, around 100 staff members are based in the eastern separatist regions of Donetsk and Lugansk.

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There have been warnings that a scale-up in the conflict could displace millions of people and cause a humanitarian crisis.

The UN refugee agency said Tuesday that for now it was not seeing any increased movements outside the eastern regions.

But “the situation does remain unpredictable,” spokeswoman Shabia Mantoo told reporters in Geneva.

She highlighted the UNHCR’s strong presence in Ukraine.

“We do stand ready to support efforts by governments and other stakeholders to protect refugees and find solutions for people who are displaced in case there are any movements.”

The UN humanitarian agency OCHA meanwhile warned that it was seeing reports of increased hostilities in the east of Ukraine, which has been wracked by conflict for eight years already.

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Spokesman Jens Laerke said the UN was continuing to follow a humanitarian response plan put in place before the latest escalation in tensions, including most recently sending an aid convoy into the non-government controlled areas last Friday.

He warned though that even that response lacks funding, stressing that the best preparation for what could possibly be a dramatic increase in needs was to finance the existing aid efforts on the ground.

The EU’s economy commissioner Paolo Gentiloni said on Tuesday that Russia’s recognition of Ukraine’s breakaway regions will “significantly increase” economic uncertainty.

“Uncertainty still hangs over us. And Russian recognition of two separatist territories in Ukraine, which is a violation of international law, will exacerbate this uncertainty,” Gentiloni said at a Brussels conference.

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Gentiloni spoke as EU ambassadors met to agree on sanctions against Russia for recognizing two separatist regions in Ukraine the day before, which Moscow has militarily supported for the past eight years.
Russian President Vladimir Putin has ordered troops into those separatist regions, breaking international agreements he had signed on to. He portrayed the incursion as a “peacekeeping” mission.

The European Union was expected to unveil limited and targeted economic punishment, both to keep its sanctions powder dry should Russia push further into Ukraine and because of the pain it would feel too from sectoral sanctions
Russia supplies more than a third of the EU’s natural gas supplies, and energy prices are already spiking to uncomfortable levels for European consumers and governments.

Gentiloni, speaking at an EU conference on the bloc’s economic situation, noted that the growth forecasts for this year had already been revised down earlier this month to 4.0 percent, and up to 2.8 percent for next year.

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Conflict or tough sanctions on Russia that blowback into Europe could add to the downward pressure on the Covid-hit economy.