Oil price hits seven-year high as Vladimir Putin orders troops into Ukraine

Oil prices touched a seven-year high and stock markets in Asia fell after Vladimir Putin ordered Russian troops into Ukraine, putting the country on a war footing and forestalling attempts to find a diplomatic solution to the crisis.

Brent crude, the international oil benchmark, jumped as much as 2.4 per cent to $97.66 a barrel, its highest level since September 2014, before paring gains to sit 1.5 per cent higher at $96.80. West Texas Intermediate, the American marker, rose 3.1 per cent to $95.19 as US trading resumed following a national holiday on Monday.

In equities markets, Hong Kong’s benchmark Hang Seng index shed 3 per cent, while Japan’s Topix fell 1.6 per cent and China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped 1.7 per cent.

“In the short term, we’re simply going to be trading the headlines,” said Robert Rennie, global head of market strategy at Sydney-based Westpac. “Obviously the headlines have taken a very ominous turn in the last few hours.”

Futures indicated a Wall Street would tumble, with the S&P 500 set to drop 1.5 per cent and the tech-focused Nasdaq expected to fall 2.1 per cent. In Europe, Euro Stoxx 50 futures pointed to a 1.4 per cent fall for shares, while the FTSE 100 was expected to lose 0.8 per cent.

In sovereign debt markets, bond yields fell as investors sought safety from falling share prices, with the yield on the 10-year US Treasury down 0.07 percentage points to 1.8595 per cent.

Global markets moved after Moscow said it had destroyed Ukrainian military vehicles that entered Russian territory and Putin agreed to recognise two Moscow-backed separatist regions in eastern Ukraine. The unconfirmed incident would be the first direct clash since Moscow mobilised hundreds of thousands of troops on its border with Ukraine.

US secretary of state Antony Blinken said Putin’s decision to recognise the Russian-backed Donetsk and Luhansk people’s republics as independent was a “clear attack” on Ukraine’s sovereignty. A senior US official warned on Monday that a Russian invasion of Ukraine could be launched as early as in the “coming hours”.

The UK is expected to announce sanctions against Russia on Tuesday. Foreign secretary Liz Truss said the measures would be imposed in response to Moscow’s “breach of international law and attack on Ukraine’s sovereignty and territorial integrity”.

The crisis in Ukraine has stoked volatility in global markets in recent weeks, driving up energy prices on concerns that supply chains could face severe disruption in the event of a conflict. Analysts at JPMorgan have estimated oil could hit $120 a barrel in the coming weeks if the crisis in Ukraine worsened.

The conflict has also sent Russian stocks plummeting. The country’s benchmark Moex index dropped 10.5 per cent on Monday, the biggest one-day fall since Russia seized Crimea in 2014.