Oil prices went up Tuesday as investors shifted more money into US government bonds as Russia stepped up its war against Ukraine.
Stocks fell after a volatile day for major indexes, as investors tried to measure the impact of the conflict on the global economy. The S&P 500 index fell by 0.7% as of 10: 14 a.m. Eastern. The Dow Jones Industrial Average fell 337 points, or 1%, to 33,554 and the Nasdaq fell 0.5%.
Markets for oil, agricultural commodities and government bonds made the bigger moves. Russia is one of the world's largest energy producers because of the importance of oil. The price of inflation is putting pressure on households around the world, which is why there is a surge in prices.
The US benchmark crude oil prices rose 6.6% to $101.87 per barrel, reaching the highest price since 2014. Russia's invasion of Ukraine has also put more pressure on agricultural commodity prices, which were already getting pushed higher with rising inflation. Wheat and corn prices went up more than 4% per bushel and are already up more than 20% this year. Ukraine is an important exporter of both crops.
The investors put money into bonds. The yield on the 10 year Treasury fell to 1.75% from 1.83% late Monday. It is back to where it was in early February, before reaching 2% for the first time in over two years.
The Ukraine conflict has shaken markets around the world and added to worries about economic growth in the face of rising inflation and plans for central banks to raise interest rates. The US and its allies have been putting a lot of pressure on Russia's financial system as it continues to push into Ukraine and its key cities.
The Russian ruble's value plunged to a new all time low on Monday after Western countries tried to block Russian banks from a key global payments system. The US Treasury Department announced more sanctions against Russia's central bank on Monday.
Various companies have announced plans to scale back or pull out of ventures in Russia or suspend operations in Ukraine due to the conflict. In a desperate attempt to shore up the plummeting ruble and prevent a run on banks, the Russian central bank has raised its key rate to 20% from 9.5%. Russia's stock market was closed on Tuesday.
The Fed Chair Jerome Powell is due to testify before Congress later this week, and that could give clues on the path ahead for raising interest rates. The Fed will have more leeway to raise rates if strength continued in the US jobs market in February, according to a report on Friday.