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Valentine’s Day massacre as shares plunge, oil soars

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IL hit a seven-year high, gas prices jumped by more than 10% and shares across Europe wobbled as markets fretted about rising tensions between the US and Russia over Ukraine.

In what was predictably dubbed a Valentine’s Day massacre, the FTSE 100 lost 130 points to 7529 with travel and bank shares hit hardest. The index fell over 2% at one point.

Russia’s Moex index was down nearly 3% — shares in Asia and Europe followed.

The cost of a barrel of oil rose nearly 2% to $96.16 a barrel, a direct impact to family finances due to the implications for fuel prices ahead of the latest inflation figures on Wednesday that are likely to increase talk of a cost-of-living crisis for many.

Gas prices rose 10% to 199p per therm on fears Russian supplies to Europe will be impacted. The price is four times higher than it was a year ago.

There are real concerns that what was already regarded as an energy crisis could turn into a true shortage of supply, irrespective of price.

Russia, Europe’s top supplier of gas, has denied it plans to attack Ukraine amid claims otherwise from the US.

The Ukraine situation is increasing investor caution towards any risky assets. Credit Suisse said in a note to clients: “Markets were already uneasy about the prospect of more aggressive interest rate rises in the US and elsewhere and about stretched valuations, peak earnings growth and profit margins.”

Susannah Streeter at Hargreaves Lansdown said: “Just as the storm of Covid appeared to be receding, the growing expectation of an invasion of Ukraine is the fresh threat now unnerving investors, with confidence plunging in many parts of the world.”

Analysts think oil is heading past $100 a barrel, a level not seen for about eight years.

Naeem Aslam at Avatrade said: “The potential jump in oil prices depends on what sort of sanctions the United States of America and its allies are likely to impose on Russia if it actually invades its neighbour. Even before the conflict, oil prices were under pressure as demand was rapidly climbing because of the global economic recovery and supply-side constraints and lower inventories.”

Inflation on Wednesday is likely to come in at 5.4% — economists think it is headed to 7%. Last week inflation in America hit 7.5% after the biggest jump in 40 years.

A Russian invasion of Ukraine could push major economies into recession, warns Morgan Stanley analyst Michael Wilson. A war “materially increases the odds of a polar vortex for the economy” he said.

G7 nations today said there would be “swift, coordinated and forceful response” that will have “massive and immediate” consequences for the Russian economy if there is an invasion.

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