File Photo: A man wearing a face mask walks past a bank s electronic board showing the Hong Kong share index in Hong Kong, Wednesday, March 2, 2022. Asian stock markets slid Wednesday and oil prices surged more than $5 per barrel as Russian forces stepped up attacks on Ukrainian cities. AP
As Russia's invasion of its neighbour continues, commodity prices have been sent to record or multi-year highs, forcing observers to re-evaluate their outlook for the global recovery with some now warning of a period of soaring inflation and low growth or recession.
Monday's session saw a sea of red across trading floors after the United States said it was considering banning the import of crude from Russia, the world's number three producer, sending the price of Brent to almost $140 for the first time since 2008.
While the black gold eased back slightly from that peak, it remains elevated and continued to rise again on Tuesday.
Europe was not so keen on the US idea, with German Chancellor Olaf Scholz saying Russian oil and gas are of "essential importance" to the continent's economy. Roughly 40 percent of EU gas imports and one quarter of its oil come from Russia.
Meanwhile, Moscow warned that in retaliation for strict sanctions imposed on it for the invasion, it could cut off natural gas supplies to Europe via the Nord Stream 1 pipeline, adding further upward pressure to crude as investors bet on a search for other sources of energy.
European gas prices hit records Monday, while other commodities sourced from Ukraine and Russia also rallied, with wheat at an all-time high and nickel breaking $100,000 a tonne for the first time before easing back.
The crisis comes just as uncertainty was rising owing to surging prices caused by a spike in demand for oil, tight supplies and pandemic-induced supply chain snarls, among other things.
Meanwhile, central banks are starting to wind back the ultra-loose monetary policies put in place at the start of the pandemic as they try to get a grip on runaway prices.
And while analysts have lowered their expectations for how much and how quickly officials will tighten in light of the war, they still see a tougher investing environment down the line.
"It's all about slowing growth and rising inflation," Alifia Doriwala of Rock Creek told Bloomberg Television. "With the sanctions on Russia intensifying, it's hitting all sectors. Then you are going to have some central bank action amidst much uncertain economic growth."
After a rout on US markets, Asia was again well into negative territory.
Tokyo, Hong Kong, Singapore, Seoul and Wellington lost more than one percent, while Shanghai, Bangkok and Taipei were off more than two percent. Manila sank more than four percent, while Sydney, Jakarta and Mumbai were also in the red.
London, Paris and Frankfurt extended Monday's big losses at the open.
"Disruptions to energy markets and the possibility of a geopolitical paradigm shift make for a highly unpredictable environment." said Stephen Innes, of SPI Asset Management.
"Given the length of time this has gone on with the possibility of all sides becoming further entrenched in their positions, the geopolitical situation seems likely to get worse before it gets better, although we should reach a point at which equities start to price in a light at the end of the tunnel before it becomes obvious."
And StoneX Financial's Matt Simpson added: "It was the sharp rise in oil which triggered the sell-off in equities as traders priced in stagflation worries once again.
"Should oil prices stabilise then it should remove some selling pressure across equity markets."
Key figures around 0820 GMT
Tokyo - Nikkei 225: DOWN 1.7 percent at 25,790.95 (close)
Hong Kong - Hang Seng Index: DOWN 1.4 percent at 20,765.87 (close)
Shanghai - Composite: DOWN 2.4 percent at 3,293.53 (close)