Dow falls into correction as Russian attack on Ukraine roils world markets

U.S. markets careened at the open, with all major indexes slumping 2 percent or more. Around 11:30 a.m., the Dow Jones industrial average had recovered some ground but remained down 580 points, or 1.7 percent. The broader S&P 500 index had also clawed back some but remained down about 1 percent. The tech-heavy Nasdaq briefly entered a bear market before reversing course and falling flat.

Though the Russian incursion is just beginning, signals Thursday — including strikes across Ukraine — suggested a wide-ranging military offensive that would trigger deep sanctions from the United States and European Union, hurting not just the Russian economy, but the whole world’s. Consumers around the globe are already facing widespread price increases tied to raging inflation and troubled energy markets, and now pains are likely to grow more acute.

Russia is a dominant natural gas and oil exporter, particularly to Europe, and some of its supply transits via pipeline across Ukraine. The price of Brent crude, the global benchmark, shot up 7.9 percent to nearly $101.50 a barrel — the first time it’s been in the triple digits since 2014 — while U.S. oil jumped 8.3 percent to $99.70.

The national average for a gallon of gasoline on Thursday was $3.54 according to AAA, up from $3.33 just a month ago. A year ago, when demand was still largely flattened by the pandemic, the national average was just $2.66.

Russia has warned that Americans will fully feel the “consequences” of sanctions President Biden announced earlier this week. Biden has acknowledged that the crisis could lead to higher gasoline prices, while U.S. businesses have been warned to prepare for possible cyberattacks. Biden said that more “severe sanctions” will be announced Thursday in the wake of the invasion.

“The bigger the conflict gets, the larger the impact to global energy supply will be, the larger the drag on the European economy, and the larger the potential drag on U.S. exports and consumption spending will be,” Bill Adams, chief economist for Comerica Bank, said Thursday in comments emailed to The Post.

Markets loathe uncertainty, and the attack is arriving at a moment when the global economy is already wrestling with pandemic-related challenges in the form of soaring inflation, chaotic supply chains and labor shortages.

Investors fled to safer assets, sending the yield on the 10-Year U.S. Treasury note sharply lower to 1.865 percent. Bond yields move inversely to prices.

Gold — a Russian export and an investor safe haven — soared nearly 3 percent to trade around $1965 per troy ounce. Benchmark prices of aluminum, nickel, wheat and corn (other exports from Russia and Ukraine) also soared to multiyear highs.

For all the immediate financial reaction Thursday, no country absorbed greater losses than those in Russia, whose major stock market index nosedived some 45 percent in the early hours Thursday, hitting its lowest level since 2016. Trading was briefly suspended amid the free-fall. The ruble slumped to its weakest point in at least the past 10 years, giving Russians less spending power when they go abroad.

Oil prices have risen more than 40 percent since December, influenced in part by speculation that Putin might launch an attack as Russia amassed troops on three sides of Ukraine.

After Russia’s 2014 invasion of Crimea, Europe’s dependence on Russian energy held the bloc back from enforcing certain both-sides-suffer sanctions. But European leaders this time are likely to agree that a more severe response is necessary, and they are drawing up plans to wean themselves from dependence on Russian oil and gas.

That includes, most immediately, shelving the Nord Stream 2 gas pipeline between Germany and Russia. But any new energy strategy is certain to take years — and will come at a massive taxpayer expense.

An analysis last week from Barclays, the British bank, noted that Europe would struggle to “substitute large quantities of Russian oil and gas with alternative energy sources in other countries, especially in a short period of time.” The bank’s analysis said this could lead to rationing, higher prices, and ultimately cut into GDP growth.

Some of those concerns were evident in Thursday’s stock market, where Germany’s DAX index fell even more sharply than most, sliding 4.5 percent by midday. The index has lost more than 14 percent of its value since early January. Europe’s benchmark Stoxx 600 index declined 3.3 percent.

European Commission Ursula von der Leyen said the 27-nation bloc would convene later Thursday to discuss new sanctions. The measures, she said, would weaken Russia’s economic base and its “capacity to modernize” by freezing the country’s assets in the E.U. and stopping its access to the European financial market.

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