European stock markets were in a sea of red on Monday as hopes of talks between Ukraine and Russia lift indices as oil prices fell back from record highs.
The FTSE 100 (^FTSE) clawed back losses from a 2.6% fall, down 0.4% after the closing bell. France’s CAC (^FCHI) was 1.3% lower, after climbing back from a 4.6% crash, and the DAX (^GDAXI) crashed 2% after initially slumping 4.5% in Germany.
European markets suffered their worst weekly losses last week since the start of the coronavirus pandemic in March 2020, with the DAX hitting its lowest level in more than a year.
Ukraine and Russia are set to hold negotiations for the third time since the invasion on Monday. The same delegation that attended the previous peace talks will be present, according to Mykhailo Podolyak, one of Ukrainian president Volodymyr Zelensky's top advisors.
Negotiations with the Russian Federation. Third round. Beginning at 16.00 Kyiv time. Delegation unchanged... pic.twitter.com/ycfT9LT0tc
— Михайло Подоляк (@Podolyak_M) March 7, 2022
Shares in the Russian miner briefly soared over 700% to 1,400p in early trading. The exchange operator said it was scrapping all traders executed between 8.41AM and 9.02AM, after initially reviewing the deals.
Polymetal International, which is set to be kicked out of London’s bluechip index after the Ukraine crisis sparked a collapse in its shares, is currently up 19.3% to 202p.
Meanwhile, analysts warned the "spectre of stagflation is hovering over financial markets" as oil and gas rocket in price and worries about the effect on global growth heightens.
"The FTSE 100 has retreated further away from the psychological 7,000 mark as investors asses the impact on the worsening situation in Ukraine on soaring inflation and the potential of stumbling growth," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The warning follows the UK announcing it will consider barring Russian oil imports after the US said it was in talks to do so.
James Cleverly, Europe minister, told Times Radio on Monday: "We import very, very little Russian hydrocarbons anyway. So that's something that we will of course, consider."
British lawmakers are also looking to amend legislation to make it easier to implement sanctions against Russian oligarchs, which could see their assets frozen. Government ministers are tabling changes to the Economic Crime Bill which will allow Britain to align penalties imposed by allies in the EU and US.
Read more: How economic sanctions work
Oil soared to its highest level since 2008 amid reports that the US is open to banning Russian crude despite Europe being more reluctant against such a move due to the bloc’s reliance on energy imports from the country such as gas.
Brent crude oil (BZ=F) jumped to as high as $139 (£105.12) a barrel in Asia trading. The benchmark is currently up 1.9% to $120.32, while West Texas crude (CL=F) rose 1% to $116.84 at the time of writing.
Prices eased back from their blistering heights after Germany hit the brakes on talks about a Russia energy import ban.
Chancellor Olaf Scholz said supplies from the Kremlin were of "essential importance" to the bloc's economy, adding that heating, transport and electricity could not be secured otherwise.
Scholz said that while the EU faced an urgent task of finding alternatives to Russian energy supplies, this won’t happen overnight. "It’s therefore a conscious decision on our part to continue the activities of business enterprises in the area of energy supply with Russia."
Oil giant Shell (SHEL.L) is said to have started limiting sales of heating oil to some German wholesalers in the first sign that the Ukraine crisis could spark energy shortages. The company has reduced spot sales to ensure it can continue to meet contractual obligations amid huge prices spikes and shortages, Bloomberg reports.
"Few people would argue against sanctioning Russian energy supplies on moral grounds but doing so would force sky high prices even higher, perhaps even resulting in supply shortages and the German Chancellor for one is opposed to the move," said Danni Hewson, financial analyst at AJ Bell.
Other commodities also soared as oil rose. Gold prices (GC=F) neared all-time highs as investors flocked to the safe haven instead of other assets. Spot gold rose 1.7% to $2,000 per troy ounce.
While the pound (GBPUSD=X) sank to its lowest against the dollar since December 2020 as investors rushed to safety as the Ukraine conflict deepens.
Across the pond, US benchmarks opened mixed on Monday as US president Joe Biden was holding talks with Venezuela, Iran and Saudi Arabia to unlock some supply.
Asian stocks fell sharply overnight as the escalation heightened fears over supply and demand destruction and a global recession. The MSCI’s broadest index of Asia-Pacific shares excluding Japan fell 0.2%.