Brent crude oil prices dived 13% to $111 per barrel on Wednesday after touching 14-year highs earlier in the week amid concerns about Russia’s invasion of Ukraine and subsequent sanctions from the West.
Meanwhile, West Texas Intermediate crude fell 12% to $109 per barrel while natural gas recovered from mid-day losses to end the day flat.
Oil prices were nudged down by news that the United Arab Emirates favors increasing oil production and is set to push OPEC for higher output, Reuters reported. Additionally, Ukrainian President Volodymyr Zelensky said in an interview with the German newspaper Bild on Wednesday that, “compromises can be made, but they must not be a betrayal of my country,” lending some hope to a possible end to the conflict.
However, the war continued to take a heavy toll on civilians as Russian airstrikes hit a maternity ward in the Ukrainian city of Mariupol, and the Kremlin’s forces repeated their attempts to encircle the Ukrainian capital Kyiv, illustrating the two sides may still be far from an agreement.
An equity, crypto rally
Stock investors rejoiced on Wednesday as the Dow Jones Industrial Average rose 653 points to 33,286, marking a day of relief from recent war-induced retreats. The S&P 500 and Nasdaq followed suit, soaring 2.5% to 4,277 and 3.6% 13,255, respectively, as buyers piled into riskier stocks that had taken bigger hits over the past few weeks.
The Dow was led by Salesforce and American Express, which both notched over 5% gains. Energy companies like Chevron, Phillips 66, and Exxon were the biggest losers in equity markets amid oil’s rout.
“The equity market continues to take its cues from changes in commodity prices, namely oil,” Kathy Bostjancic, chief U.S. Economist at Oxford Economics, told CNBC. “Trading will continue to be volatile and rally when (oil) prices retreat.”
Abroad, Germany’s DAX index skyrocketed 7.9%, and the EURO STOXX 50 saw a 7.44% gain in the biggest rally since the pandemic bottom in March 2020.
“Risk markets are higher today, suggesting traders are no longer in flight mode and are starting to think about value again,” Chris Low, chief economist at FHN Financial, told Bloomberg. “That doesn’t mean volatility is over. Economic consequences, macro and micro, are still in flux.”
Bitcoin’s price also jumped on Wednesday, rising roughly 8% to near $42,000, while Ethereum rose 5.5% to top $2,690.
Cooling commodities
Wednesday was also a cooler day for raw materials and metals as Bloomberg’s commodity index dropped 5.1% after a month of strong gains because of the Russia-Ukraine conflict. The index, which is seen as a solid reflection of overall commodity pricing, had risen over 20% in the last 30 days before the drop.
Gold prices also fell 2.15% to end just below $2,000 per troy ounce, while silver and platinum experienced drops of 3% and 6.3%, respectively.
Wheat tumbled 6.6% on the day as well, easing fears of a shortage due to Russia’s invasion of Ukraine. Corn, sugar, and lumber prices also fell on Wednesday, leading commodities lower.