Stocks slide and oil surges on renewed fears of Russia invasion of Ukraine

By Paul R. La Monica, CNN Business

Stocks fell sharply Friday after the White House said Americans should leave Ukraine “immediately” due to worries about an imminent invasion by Russia.

The Dow Jones Industrial Average fell a little more than 500 points, or 1.4%, after the Biden administration said it would be ready to respond if Russia invades. The S&P 500 and Nasdaq ended the day down 1.9% and 2.8%, respectively.

“The Russia-Ukraine tensions have hovered over already shaky investor sentiment,” said John Lynch, chief investment officer for Comerica Wealth Management, in a report. “Investors have been counting on a diplomatic resolution, but recent developments indicate this may be wishful thinking and therefore, not fully priced into the markets.”

Lynch said it’s “conceivable” that the rising tensions could lead to another market correction — defined as a pullback of 10% from recent highs — “as investors sell first and ask questions later.”

All three indexes were lower for the week, ending a two-week winning streak for the market. And the CNN Business Fear & Greed Index, which looks at seven measures of market sentiment, moved closer to Extreme Fear levels.

“Stock traders quickly hit the ‘sell button’ after reports that the US expects Russia to move forward with invading Ukraine,” said Edward Moya, senior market analyst with OANDA, in a report Friday. “A period of calm was somewhat expected regarding the Ukraine situation but that does not seem to be the case anymore.”

In its warning that Americans should leave Ukraine, the White House also indicated that Russia could launch air strikes before the Winter Olympics in Beijing end later this month.

Effect on energy

Russia worries spilled over to the commodities markets as well. A top exchange-traded fund of Russian stocks plunged more than 7%. Oil prices spiked about 4%, and top energy stocks such as Baker Hughes, Occidental Petroleum and Phillips 66 were market leaders.

Analysts have warned that a conflict in Ukraine could threaten energy supplies, including through potential sanctions, as Russia is the world’s No. 2 producer of both oil and natural gas.

Oil could “easily” hit $120 a barrel if there are “any disruptions” to oil flows from Russia — and it could possibly go as high as $150, JPMorgan analysts said earlier this week.

The peak for Brent crude is $147.50, set in July 2008. Any further spike in energy prices would add to the already high levels of inflation pinching US consumers.

Gold prices also rose Friday. It often rallies during times of geopolitical turmoil since it is perceived to be a safe haven commodity. Bitcoin, which some crypto bulls have argued is like digital gold, fell however.

Comerica’s Lynch noted that “should an invasion occur… commodity prices may also accelerate, led by oil and gold.”

Meanwhile defense stocks rallied, possibly on expectations of more demand for military spending if there is a conflict. Northrop Grumman, L3Harris and Lockheed Martin were among the winners in the S&P 500.

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CNN’s Matt Egan contributed to this story