By DAMIAN J. TROISE and ALEX VEIGA – AP Business Writers
NEW YORK (AP) — Oil prices soared and Wall Street investors shifted more money from stocks to ultra-safe U.S. government bonds on Tuesday as Russia escalated its war on Ukraine .
Shares fell as investors tried to gauge the impact of the conflict on the global economy. The S&P 500 index was down 1.5% at 3:26 p.m. EST. The Dow Jones Industrial Average fell 576 points, or 1.7%, to 33,316 and the Nasdaq fell 1.5%. The declines add to market losses after a two-month slide for the S&P 500.
The largest movements came from the oil, agricultural commodities and government bond markets. Oil has been a major concern as Russia is one of the largest energy producers in the world. The latest price hike is increasing pressure on persistently high inflation that threatens households around the world.
Benchmark U.S. crude jumped 8% to $103.41 a barrel, hitting the highest price since 2014. Brent crude, the international standard, jumped 7.1% to $104.97.
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The crisis in Ukraine prompted an extraordinary meeting of the International Energy Agency’s board of directors, which resulted in the agreement of the 31 member countries to release 60 million barrels of oil from their strategic reserves.
Russia’s invasion of Ukraine also put increased pressure on agricultural commodity prices, which were also already pushed higher with rising inflation. Wheat and corn prices have risen more than 5% per bushel and are already up more than 20% since the start of the year. Ukraine is a key exporter of both crops.
Investors continued to invest in bonds. The 10-year Treasury yield fell sharply, slipping to 1.72% from 1.83% late Monday. It is now back to what it was in January. In February, it was back above 2% for the first time in more than two years. The 10-year Treasury yield is used to set interest rates on mortgages and many other types of loans.
The conflict in Ukraine rattled global markets and added to concerns about economic growth amid rising inflation and central bank plans to raise interest rates. The United States and its allies are putting significant pressure on Russia’s financial system as that country continues its push into Ukraine and its key cities.
The value of the Russian ruble fell to a record low on Monday after Western countries moved to block some Russian banks from a key global payment system. Also on Monday, the US Treasury Department announced new sanctions against the Russian central bank.
Various companies have announced plans to downsize or withdraw from business in Russia, or suspend operations in Ukraine due to the conflict. Russia’s central bank also raised its benchmark rate from 9.5% to 20% in a desperate attempt to prop up the ruble’s slide and stave off a run on the banks. The Russian stock exchange remained closed on Tuesday.
Investors are watching developments in Ukraine closely as they await the latest updates from the Fed and the US government on the economy. Fed Chairman Jerome Powell is due to testify before Congress later this week and that could offer clues on the way forward to raise interest rates. A report on Friday will also show whether US job market strength continued in February, giving the Fed more room to raise rates.
Several stocks made big moves on earnings. Target jumped 10.5% after reporting strong fourth-quarter financial results and saying it would invest up to $5 billion this year in brick-and-mortar stores, renovations and other initiatives. Workday rose 6.8% after reporting encouraging results.
Veiga reported from Los Angeles.
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