NEW YORK (AP) — Stocks are tumbling on Wall Street Monday as another big leap for oil prices threatens to squeeze inflation’s grip on the global economy.
The S&P 500 fell 2.1 percent after a barrel of U.S. oil surged to $130 overnight on the possibility the U.S. could bar imports from Russia. Stocks around the world slid even more sharply earlier in the day, also taking their cue from oil’s movements, though their losses moderated as crude receded toward $120 per barrel.
The Dow Jones Industrial Average was down 573 points, or 1.7 percent, at 33,040, as of 1:26 p.m. Eastern time, and the Nasdaq composite was 2.5 percent lower. Stocks are on pace for their worst losses since Russia invaded Ukraine.
Gold and a measure of nervousness on Wall Street were also higher, though not by quite as much as when oil prices hit their peak. The price of gold briefly touched $2,007.50 per ounce before trading at $1,991.90, up 1.3 percent.
Oil prices have soared recently on worries that Russia’s invasion of Ukraine will upend already tight supplies. Russia is one of the world’s largest energy producers, and oil prices were already high before the attack because the global economy is demanding more fuel following its coronavirus-caused shutdown.
READ MORE: U.S. gas prices spike as calls to ban Russian oil continue
U.S. House Speaker Nancy Pelosi said in a letter to her colleagues on Sunday that “the House is currently exploring strong legislation” to further isolate Russia because of its attack on Ukraine. That could include a ban on imports of Russian oil and energy products, she said.
It’s a major step that the U.S. government has not yet taken, despite a long list of moves to punish Russia, as the White House has said it hopes to limit disruptions to oil markets. It wants to limit price jumps at the gasoline pump.
Reports also said U.S. officials may be considering easing sanctions against Venezuela. That potentially could free up more crude oil and ease concerns about reduced supplies from Russia.
A gallon of regular already costs an average of $4.065 across the country after breaching the $4 barrier on Sunday for the first time since 2008. A month ago, a gallon averaged $3.441, according to AAA.
A barrel of U.S. crude oil was trading at $120.74 per barrel, up 4.1 percent, after earlier touching $130.50. Brent crude, the international standard, was up 5.9 percent at $125.10 per barrel after earlier topping $139.
Markets worldwide have swung wildly recently on worries about how high prices for oil, wheat and other commodities produced in the region will go because of Russia’s invasion, inflaming the world’s already high inflation. In the United States, prices for consumers jumped last month from their year-ago level at the fastest rate in four decades.
The conflict in Ukraine also threatens the food supply in some regions, including Europe, Africa and Asia, which rely on the vast, fertile farmlands of the Black Sea region, known as the “breadbasket of the world.”
The war puts extra pressure on central banks around the world, with the Federal Reserve on course to raise interest rates later this month for the first time since 2018. Higher rates slow the economy, which hopefully will help rein in high inflation. But if the Fed raises rates too high, it risks forcing the economy into a recession.
“Their reaction to geopolitics can’t really be measured, so there’s uncertainty around that,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
Some investors have seen the war in Ukraine as potentially pushing the Fed to go easier on rate increases. Investors love low rates because they tend to boost prices for stocks and all kinds of markets.
But that may not necessarily be the case this time, Goldman Sachs economists wrote in a report. With prices for oil, wheat and other commodities potentially rising even more, the threat is higher for a sustained, high inflation to settle on the economy. That could flip the Fed’s traditional playbook.
WATCH: Why gas prices could remain high for some time
“After several decades in which economic, financial, or political shocks invariably caused interest rates to fall, markets may have to re-learn that the opposite can also be true,” Goldman Sachs economist Jan Hatzius wrote.
Beyond sanctions brought on Russia by governments because of its invasion of Ukraine, companies are also levying their own punishments. The list of companies exiting Russia has grown to include Mastercard, Visa and American Express, as well as Netflix.
The value of the Russian ruble continued to slide amid all the financial pressure, falling another nearly 20 percent. It dropped below 0.7 cents.
“The Ukraine-Russia conflict will continue to dominate market sentiments and no signs of conflict resolution thus far may likely put a cap on risk sentiments into the new week,” said Yeap Jun Rong, market strategist at IG in Singapore.
“It should be clear by now that economic sanctions will not deter any aggression from the Russians, but will serve more as a punitive measure at the expense of implication on global economic growth. Elevated oil prices may pose a threat to firms’ margins and consumer spending outlook,” Yeap said.
On Wall Street, shares of Bed Bath & Beyond soared after the investment firm of billionaire Ryan Cohen took a nearly 10 percent stake in the company and recommended big changes. Cohen is the co-founder of Chewy, and he’s amassed somewhat of a cult following after he took a stake in GameStop, the struggling video game chain that eventually named him board chairman.
Shares of Bed Bath & Beyond jumped 27.2 percent to $20.58.
Treasury yields climbed, with the 10-year rising to 1.73 percent from 1.72 percent late Friday.
AP Business Writers Damian J. Troise and Yuri Kageyama contributed.
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