Brent price soars nearly 30%, stocks crash in Asia, dollar rises: online

The working week on the markets began with a sharp rise in oil prices, the collapse of shares in Asia and strengthening of the dollar. We follow what is happening online in this material.

07.38 CET: The rise in oil prices is slowing amid news that the G7 countries will discuss an emergency release of stockpiles from strategic reserves. May Brent futures are now up less than 17% at $108.4.

Since the beginning of trading on Monday, oil traders have already sold almost 900,000 lots of Brent crude oil - this is more than 75% of the average trading volume for a full day over the past year, Bloomberg writes. The agency calls such volumes unprecedented.

Traders also broke a record last week, selling 18.6 billion barrels - enough for about six months of global consumption, Bloomberg notes.

07.25 CET: The risk of a sharp fall in US stocks in the US before the end of the year has increased, according to renowned strategist Ed Yardeni. He has raised the probability of a market collapse this year from 20% to 35%, Bloomberg reports, citing a recent note by the expert. At the same time, Yardeni has reduced from 20% to 5% the probability of an "explosive" rally, driven more by investor enthusiasm than by fundamental factors.

Yardeni has been right before in his predictions about market moves, Bloomberg notes. In December, the strategist recommended that investors reduce their exposure to the so-called Magnificent Seven tech stocks relative to the rest of the S&P 500 index.

07.10 CET: The price of gold fell 2.5% to below $5050 per ounce in early trading, but has now trimmed the decline to 0.5%.

The precious metal is being pressured by "an inflationary monster that is strengthening the dollar," explained Hebe Chen, an analyst at Vantage Markets in Melbourne. "The $100 oil price has set off a chain reaction: energy shock, rising inflation expectations, strengthening dollar and weakening gold," she said.

Higher inflation fears in the U.S. make it more likely that the Fed will keep interest rates unchanged - or even raise them - for longer. And higher borrowing costs, like a stronger dollar, are generally negative for precious metals, which do not generate interest income. In addition, gold has become a source of liquidity amid an intensifying sell-off in global stock markets, Bloomberg notes.

06.55 CET: Currency markets are now guided by the principle: buy the dollar and nothing else, Bloomberg writes, with the U.S. currency strengthening against all major competitors - even the currencies of oil-producing countries such as Norway. The krone fell 0.8% against the U.S. dollar.

"The dollar is seen as an absolute safe haven due to its liquidity while being bought back due to rising oil prices," said Ebury's head of market strategy Matthew Ryan. - "We expect the dollar to rise further while the war continues and its imminent end is not in sight.

06.45 CET: States may be forced to tap strategic oil reserves, warns Dutch banking group ING Groep. "Clearly, pressure in favor of such action will grow as supply tightens and oil prices hold above $100 a barrel," Warren Patterson, head of commodity markets strategy at the bank in Singapore, wrote, as quoted by Bloomberg. According to the analyst, "the market is forced to aggressively price in a prolonged supply disruption."

At least three G7 countries, including the U.S., support the use of strategic oil reserves, according to Financial Times sources. According to them, G7 finance ministers will discuss the idea later on Monday.

06.35 CET: Tokyo's key Nikkei 225 index is down 6 percent. The fear index on the Japanese trading floor has soared to its highest level since March 2020, when the COVID-19 pandemic began, Bloomberg writes.

Japan's economy is considered particularly vulnerable to rising oil prices because the country imports about 90% of its oil from the Middle East.

Previously, investors were optimistic about Japan for several reasons, from Prime Minister Sanae Takaichi's stimulus policy to support for corporate governance reforms. Between the beginning of the year and the Iranian crisis, the Nikkei index rose 16%, outperforming major global indices.

06.20 CET: A brief update on what's happening in the markets:

- Brent today is likely to set a record for a single-day rise in value, Reuters writes. The price of futures for benchmark crude jumped 29% to $119.5.

- Asia, which gets a significant portion of its energy supplies from the Middle East, has seen a panic sell-off. The region's main stock index, the MSCI AC Asia Pacific Index, collapsed by 5.6%, primarily due to falling stocks in South Korea and Japan.

- Futures on the main U.S. stock index, the S&P 500, were down 1.9 percent, while the Dow Jones and Nasdaq were down more than 2 percent.

- Gold fell more than 1 percent. In contrast, the Bloomberg Dollar Index rose 0.7 percent.

Updated

This article was AI-translated and verified by a human editor