Brent crude price hit $105 per barrel on Thursday, the highest price level seen in the past eight years, after Russian President, Vladimir Putin launched an invasion on Ukraine.
However, it moderated to $102 per barrel.
WTI crude futures jumped more than 8 per cent to above $100 per barrel before moderating just under $100 per barrel.
Russia is world’s second highest oil producer after Saudi Arabia and biggest gas supplier on the globe. A disruption in supply of its oil and gas will diminish global supplies and raise prices, economists say.
Putin announced ‘a special military operation’ in Ukraine’s Donbas region on Thursday, followed by explosions in state capital Kyiv as well as other parts of the country.
The European Council is preparing to impose ‘massive and severe consequences on Russia for its actions’ after the UK and the US had imposed economic sanctions on the Eastern European country.
US President Joe Biden has said he will continue to monitor the situation from the White House and will meet members of the G-7 on the situation.
Any attempt to start a Third World War will have a devastating impact on world’s economy amid COVID-19 challenges, but it is likely to raise oil prices, say analysts.
Markets displayed all the predictable reactions. Europe’s stock markets tumbled nearly 4 per cent in frenzied selling and Wall Street opened down 2.5 per cent, while some traders described Russian and Ukraine markets as “untradeable” due to the sheer scale of the falls and Russia and Kyiv’s central banks tried to step in.
The scramble for safety saw top-rated government bonds rally strongly along with other traditional storm shelters such as the dollar, Swiss franc, Japanese yen and gold.
Putin said, he had authorised what he called a “special military operation” on Ukraine. Western governments labelled it a full-scale invasion.
U.S. President, Joe Biden said “severe sanctions” would be imposed on Russia after the attacks, with Europe’s leaders vowing to also freeze assets and shut Russian banks out of their financial markets.
“No one expected this and speculation of Putin’s next step will be the major focus of the coming days,” said Hans Peterson, global head of asset allocation at SEB investment management.
“But this does happen in a phase of the business cycle that is quite strong,” he added, saying, how high energy and commodity prices now go is also crucial.
Chaotic moves in Russia’s markets saw the double weaken nearly 7 per cent to an unprecedented 86.98 per dollar and there were record 40 per cent falls on the Moscow stock exchange which had been forced to suspend trading early on.
Ukraine meanwhile was forced to suspend trading in its currency as its bonds crashed violently as investors bet that it could now default again, as it did after Russia’s 2014 annexation of Crimea.
“It is complete chaos,” said abrdn portfolio manager, Viktor Szabo. “Ukraine is untradeable right now and it is carnage in the Russian markets across sovereign and corporate debt