Futures / Options
Stock Futures Down, Oil Prices Up Due To Ukraine-Russia Crisis
Stock futures are down, while oil prices surge higher as fears of a Ukraine-Russia crisis intensified. Russian President Vladimir Putin reportedly ordered troops to occupy separatist-controlled areas of Ukraine. This was hours after he signed decrees recognizing the independence of the Moscow-backed regions.
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Stock Futures Down Due to Escalating Ukraine-Russia Tensions
The US stock market, closed yesterday as the country observed President’s Day, reacted to developments on the Ukraine-Russia conflict. Stock futures went down Monday across all three major stock indexes.
Dow Jones Industrial Average futures fell down 494 points, or 1.45%. Meanwhile, the S&P 500 slid further down at 1.71%.
Finally, Nasdaq 100 futures were hit hardest as they contracted by 2.3%. This is despite the fact that trading was closed Monday due to the American holiday.
All Eyes on the Federal Reserve
At the same time, traders are also monitoring the US Federal Reserve. Economists are expecting the American central bank to raise interest rates multiple times this year beginning March.
According to the CME Group’s FedWatch tool, traders think there is a 100% chance of a Fed rate hike by March 16. The agency will resume its monthly meeting on March 15-16, 2022.
With the expectations of tighter monetary policy, investors began putting pressure on stocks. In particular, tech stocks are feeling the brunt, as they operate in the rate-sensitive tech sector.
As a result, Treasury yields are beginning to climb up as well. 10-year Treasury yields began 2022 at 1.51%. Now, they’re trading at 1.93% after briefly flirting with 2%.
Oil Prices Also Affected by Ukraine-Russia Crisis
Meanwhile, oil prices began to surge again as the Ukraine-Russia conflict took an ominous turn. Asia trade on Tuesday morning reported that Brent crude surged 2.24 to close at $97.55 per barrel.
Also, West Texas Intermediate crude rose sharply by 3.7% to close at $94.44 per barrel.
Both Brent and WTI crude oil prices recently broke the $90 per barrel threshold. This represented a 20% increase in oil prices for the year.
It also meant a rise of more than 80% since the start of 2021. Besides the Ukraine-Russia tension, other factors also caused the rise in prices, including lower supply amid higher demand.
However, the current Ukraine-Russia standoff remains the biggest factor today. Katrina Ell, a senior APAC economist at Moody’s Analytics, estimates that the crisis added between $10 to $15 per barrel.
She said that oil prices will continue rising as long as disruptions hit Russia’s oil and gas supplies. This will really hurt Asia’s largest economies from both production and consumption perspectives. That’s because Asia’s largest economies, such as China, Japan, and India, are net oil importers.
Russia Supporting Easter Ukraine Separatists
The latest developments in the Ukraine-Russia conflict hinges on the latter’s moves to support separatists in Ukraine's eastern areas. Putin signed decrees officially recognizing separatist movements in Ukraine’s Donetsk and Luhansk regions.
This means that Russia now recognizes the independent states of the Donetsk People's Republic and Luhansk People's Republic. In addition, Putin guaranteed both areas’ security with Russian troops. In fact, Putin already ordered the movement of peacekeeping forces into the areas.
At the same time, the Russian president also slammed Ukraine’s increased attempts to forge security ties with Western powers.
His fiery speech Monday night cast doubts on Ukraine's independence. Ukraine never had “traditions of its own statehood,” he said. Additionally, Putin claimed that the eastern part of the country was actually “ancient Russian lands.”
Watch the ABC News video reporting Ukraine’s reactions to Putin’s decision to recognize breakaway regions:
What do you think of the ongoing Ukraine-Russia tensions? Will this conflict drag on and add more pressure to both the stock market and oil prices?
Tell us what you think. Share your thoughts in the comments section below.