Oil hits fresh highs as Ukraine crisis escalates

Oil came close to touching $100 a barrel on Tuesday after Russian tanks entered Ukraine.

As at 1100 GMT, global benchmark Brent crude had put on 3% at $98.29 a barrel, as fears grew that energy supplies faced significant disruption. Earlier in the session it had touched $99.50, its highest since September 2014.

US West Texas Intermediate was nearly 5% higher at $95.19.

Last night, following weeks of tension between Russian and Ukraine, Russian president Vladimir Putin ordered troops into two rebel-held regions in the east of the country.

The US and its European allies are now expected to announce a range of fresh sanctions against Russia. Following a Cobra meeting on Tuesday morning, UK prime minister Boris Johnson said Russia had "completely torn up" international law, adding: "We will immediately institute a package of international sanctions.

"This is just the first of a barrage of sanctions, because we believe there will be more Russian irrational behaviour to come."

Victoria Scholar, head of investment at Interactive Investor, said: "The intensifying crisis between Russia and Ukraine has raised concerns about the supply disruptions that would ensue as sanctions look to cripple Russia, the world’s second-largest oil exporter and the world’s top natural gas producer.

"If Putin continues his aggression and the threat of war becomes a reality, oil prices could easily push beyond $100 towards $120 a barrel, to fresh highs not seen since 2014.

"Not only are geopolitical tensions supporting the uptrend, but the fundamentals of supercharged demand post Covid, coupled by constrained supply from Opec+, continue to support more bullish price action ahead."

Russ Mould, investment director at AJ Bell, said: "The threat of Russia invading Ukraine was clearly visible at the end of 2021, but most investors were more concerned about inflation and how fast interest rates might go up.

"Now the threat of war is very real, and investors will need to add it to their growing list of things to worry about. This could prompt another bout of panic and lead to heightened market volatility."

Michael Hewson, chief market analyst at CMC Markets, said: "After last night’s laying down of the gauntlet by Putin, the ball is now firmly in Nato’s court, with the very real prospect that sanctions may not be enough, although they will be very much the starting point, as Europe stands on what could be the brink of war.

"Oil prices have reacted accordingly, with Brent prices pushing back up towards last week’s high on the way to $100 a barrel, which now seems only a matter of time."

The escalating situation also saw gold, a traditional safe haven asset, trade above $1,900.