Oil and gas prices are climbing on fears that the Ukraine-Russia crisis will disrupt supplies across the world.
The price of Brent crude oil, an international benchmark, reached a seven-year high of $99.38 (£73) a barrel on Tuesday.
The RAC warned the crisis would push up UK petrol prices further, after they hit a record 149.12p a litre on Sunday.
Russia ordered troops into two rebel-held regions in Ukraine’s east after it recognised them as independent states.
The main UK and US share indexes opened lower before regaining ground, but Asian stock markets closed lower.
Western powers have imposed or threatened sanctions against Russia, which is the second largest oil exporter after Saudi Arabia. Russia is also the world’s top producer of natural gas.
On Tuesday, German Chancellor Olaf Scholz took the significant step of blocking the certification of the Nord Stream 2 pipeline that would have supplied gas directly from Russia to Germany.
Wholesale gas prices jumped in response, with the UK price for April delivery up 9% and the cost for May up 10% to 191p per therm.
However, this is still considerably lower than the highs seen in December last year, when it peaked at over 400p per therm.
‘Major player’
Sanctions forcing Russia to supply less crude or natural gas would have “substantial implications” on oil prices and the global economy, said Sue Trinh of Manulife Investment Management.
Oil prices, which have been rising for months, are up more than 10% since the start of February.
Maike Currie, an investment director at Fidelity International, said oil could go above $100 a barrel due to a combination of the Ukraine crisis, a cold winter in the US, and a lack of investment in oil and gas supplies around the world.
“Russia accounts for one in every 10 barrels of oil consumed globally, so it is a major player when it comes to the price of oil, and of course, it’s really going to hurt consumers at the petrol pumps,” she said.
Most of the oil and gas that the UK imports does not come from Russia, but if Russian supplies are constrained, wholesale prices are likely to rise around the world.
Amid the tensions, average UK petrol prices at the pump hit a new high of 149.12p a litre on Sunday, before slipping back to 149.03p on Monday, the RAC said
Average diesel prices hit 152.51p a litre on Monday, just below Sunday’s record of 152.58p.
“Russia’s decision to invade Ukraine is already causing oil prices to rise and will undoubtedly send fuel prices inexorably higher towards the grim milestone of £1.50 a litre [of unleaded petrol],” said RAC fuel spokesman Simon Williams.
“This spells bad news for drivers in the UK struggling to afford to put fuel in their cars.”
‘Deep sea of red’
Russia has faced US and EU sanctions for years, but they are set to be deepened, affecting financial institutions, technology such as chips, and individuals. On Monday, the UK sanctioned five Russian banks and three billionaires, and other powers are set to impose their own penalties.
The rising tensions have worried investors at a time when the global economy is still recovering from the impact of Covid.
On Tuesday, Japan’s Nikkei 225 index closed 1.7% lower, and the Shanghai Composite fell nearly 1%.
Germany’s Dax index and the Cac 40 in France both opened lower, as did the three major US indexes, but they have all since regained ground.
The threat of war is at the forefront of investors’ minds, said Song Seng Wun, an economist at CIMB Private Banking, leaving markets in a “deep sea of red”.
“There are fears that freight and shipping costs, that are already at elevated levels, will climb higher because of demand-supply disruptions,” he told the BBC.
Russ Mould, investment director at AJ Bell, said investors had been dumping shares in commodity producers, “particularly those with exposure to either Russia or Ukraine – as well as tech and travel stocks”.
