The S&P 500 fell 2.3% after a barrel of U.S. oil surged to $130 overnight on the possibility the U.S. could bar imports from Russia. Stocks around the world slid even more sharply earlier in the day, also taking their cue from oil’s movements, though their losses moderated as crude receded toward $120 per barrel.
The Dow Jones Industrial Average was down 628 points, or 1.9%, at 32,986, as of 12:19 p.m. Eastern time, and the Nasdaq composite was 2.2% lower. Stocks are on pace for their worst losses since Russia invaded Ukraine.
It’s a major step that the U.S. government has not yet taken, despite a long list of moves to punish Russia, as the White House has said it hopes to limit disruptions to oil markets. It wants to limit price jumps at the gasoline pump. A barrel of U.S. crude oil was trading at $117.85 per barrel, up 1.8%, after earlier touching $130.50. Brent crude, the international standard, was up 3.6% at $122.34 per barrel after earlier topping $139.
The war puts extra pressure on central banks around the world, with the Federal Reserve on course to raise interest rates later this month for the first time since 2018. Higher rates slow the economy, which hopefully will help rein in high inflation. But if the Fed raises rates too high, it risks forcing the economy into a recession.
“After several decades in which economic, financial, or political shocks invariably caused interest rates to fall, markets may have to re-learn that the opposite can also be true,” Goldman Sachs economist Jan Hatzius wrote.
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