4 Mar 2014

Ukraine crisis flows to global economy

2:19 pm on 4 March 2014

Global stocks are slumping as fears of a conflict between Ukraine and Russia send investors fleeing to safe-haven assets such as gold and the yen, while oil prices soar.

One of the main concerns is that Russia supplies about a quarter of Europe's petrol needs, half of which is pumped via pipelines running through Ukraine.

Concerns about one of Europe's key gas supply routes have also had a knock-on effect on other commodities, especially oil, as demand for alternative fuels increases.

A gas compressor station in Ukraine.

A gas compressor station in Ukraine. Photo: AFP

The benchmark oil price, Brent Crude, rose to a peak of $US112.10 per barrel in early trading, its highest since 30 December.

"Oil markets are reacting on the potential that the situation could worsen," said Ben Le Brun, a market analyst at OptionsXpress.

"I definitely suspect oil will move much higher, if it actually comes to war."

On the gas markets, UK prices for next-month delivery climbed as much as 10 percent, with German and Dutch prices rising by a similar amount, according to ICE Futures Europe exchange.

The unrest in Ukraine also sent the Russian rouble to a record low against the US dollar, prompting Russia's central bank to raise its key lending rate by 1.5 percent.

As a result, the main index of Russian stocks, MICEX, dropped by 11 percent, with Gazprom shares slumping by 13 percent.