Stocks, Futures Sink as Oil Soars on Embargo Risk: Markets Wrap

(Bloomberg) — Stocks and U.S. equity futures slid Monday, while havens including sovereign bonds rose, amid fears of an inflation shock in the world economy as oil soared on the prospect of a ban on Russian crude supplies.

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S&P 500 and Nasdaq 100 contracts fell over 1% and European futures some 3%. An Asian stock index was on course for a bear market — a drop of more than 20% from a February 2021 peak. Brent crude was up 8% after briefly touching $139 a barrel. Palladium and copper hit all-time highs.

Secretary of State Antony Blinken said Sunday the U.S. and its allies are looking at a coordinated embargo following Russia’s invasion of Ukraine. The Biden administration could also act alone. High energy prices threaten to stall global growth, a risk that is sending tremors across markets.

Grains, metals and energy have surged on concerns of chaos in commodity flows due to the invasion and sanctions on Russia that are turning the resources powerhouse into a global pariah.

The euro sank — dropping to parity against the Swiss franc for the first time since 2015 — on concerns about the economic outlook for Europe, which relies on Russian energy. Sovereign bonds and the dollar advanced, with the U.S. 10-year Treasury yield falling below 1.70%. Gold touched $2,000 an ounce.

The global economy was already struggling with high inflation due to pandemic-era effects. The Federal Reserve and other key central banks now face the tricky task of tightening monetary policy to contain the cost of living without upending economic expansion or roiling risky assets.

“For the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war,” Ed Yardeni, president of Yardeni Research, wrote in a note. “For stock investors, we think 2022 will continue to be one of this bull market’s toughest years.”

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The worries about the war overshadowed China’s signal that more stimulus is on the cards after it set an economic growth target that topped forecasts. Stock markets on the…

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