Oil prices extended their rally Tuesday on supply worries as European leaders debated banning imports from Russia, though equities stood their ground despite a tepid Wall Street lead and the prospect of a sharper hike in US interest rates.
The surge in oil prices has been a key driver of turmoil on world markets in recent weeks as demand surges owing to economic reopenings just as supplies are strained. That, along with a spike in the cost of other key commodities such as metals and wheat caused by the war, has sent inflation rocketing and caused a headache for central banks already trying to wind down pandemic-era monetary policy.
Still, while Wall Street ended on a negative, equities remained resilient in Asia.Hong Kong was back on the rise after last week's blockbuster surge as Chinese authorities reiterated a pledge to support markets and the stuttering economy. China's property firms have struggled in the wake of Beijing's drive to curb excessive debt in the real estate sector, as well as rampant consumer speculation.
Focus remains on Russia's invasion of Ukraine and its impact on the global economy as surging commodity prices ramp up expectations of inflation across the world. "The entire global economy will feel the effects of the crisis through slower growth, trade disruptions, and steeper inflation," read a joint statement from institutions including the European Bank for Reconstruction and Development.Warning that the world could face the"biggest oil supply shock in decades", the International Energy Agency called on governments to urgently implement measures to cut global crude consumption within months.
But while the extreme volatility that has characterised markets since Russia's invasion three weeks ago has died down for now, commentators remain cautious.The uncertainty over Ukraine, and reports that some lockdown measures in Chinese tech hub Shenzhen - which helped fuel a markets selloff earlier this week - were being eased early, has helped push oil prices back up above $100 per barrel.
"Market sentiment was also buoyed by signs of progress in peace talks between Russia and Ukraine and pledges of more economic stimulus in China," said Bianca Botes, director Citadel Global.
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