Belgium, (Brussels Morning Newspaper) Oil prices have reached the highest level since 2008 as the US and Europe ponder a ban on Russian imports.
European shares dropped steeply due to rising oil prices and inflation fears on Monday, with the STOXX Europe 600 index reaching the lowest level since February 2021, Reuters reports.
The index slid 2.7%, with the decline largely driven by the automobile industry, retail and banks, which are down between 4% and 5%. The only sectors that boasted growth are mining and oil and gas.
French CAC index dropped more than 3%, as did Spanish IBEX, Italian FTSE MIB and German DAX.
After US Secretary of State Antony Blinken announced on Sunday that the US and its European allies are discussing the possibility of banning Russian oil imports, price of oil reached nearly US$ 140 per barrel on Monday.
Oil prices increased roughly 30% since Russia attacked Ukraine at the end of February, with the latest spike adding to global price pressures which are highest levels in decades.
European stock futures have dropped more than 2%, their US equivalents fell almost as much, while the Japanese Nikkei 225 index dropped roughly 3% and reached the lowest levels in the last 15 months.
Euro continues to decline
The euro continued to drop as oil prices surged, reaching a 22-month low against the US dollar and dipping below the Swiss franc briefly. Value of the EU currency appears to be inversely proportional to oil prices – the faster oil rises, the steeper the euro drops.
According to the US Goldman Sachs, a sustained oil price rise of US$ 20 will lower economic growth in the US by 0.3% and in the eurozone by 0.6%.
Besides the Western plan to ban Russian oil imports, prices have risen due to delays in Iran nuclear talks. As negotiations between the US and Iran mediated by the EU drag on, this delays the potential return of Iranian oil to the global market and adds to price pressures.
Safe-haven investments are gaining popularity as uncertainties mount – gold has exceeded US$ 2,000 per ounce and nickel is up more than 20%.
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