Global stocks slumped and oil prices soared on Monday as tensions over Russia’s military advance into Ukraine sent investors fleeing to safe-haven assets like gold and the yen.
In Saudi Arabia, the Tadawul All Share Index dropped 68.7 points or 0.76 percent to close at 9,019.98 points. Petrochemical Industries index fell 1 percent.
Commenting on the market crisis, John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, told Arab News: “The situation in Russia/Ukraine is making people worry around the world and people get nervous when uncertainty unfolds. But for Saudi Arabia and the region as a whole there should be less worry.”
His reaction came as the Dow Jones Industrial Average fell 202 points, or 1.2 percent, to 16,118 as of midday (1700 GMT) Monday.
Frankfurt’s DAX 30 tumbled 3.44 percent to 9,358.89 points, while Paris’ CAC-40 shed 2.66 percent to 4,290.87 points and in London the FTSE 100 dropped 1.49 percent to 6,708.35.
Russian stocks plummeted, with the MICEX market plunging 10.79 percent lower and the other main equities index, the RTS crashing down 12.01 percent, and the ruble struck historic lows against both the dollar and euro, forcing the central bank to spring an interest rate hike.
Safe-haven assets were in demand, with gold surging to a four-month peak of $1,354.87 per ounce.
Crude oil prices jumped more than $2 a barrel. Brent crude hit a peak of $112.39 per barrel, its highest since Dec. 30, and was up $2.25 at $111.32 by 1420 GMT.
US crude jumped as much as $2.28 to a high of $104.97 a barrel, its highest since Sept. 23, before easing to $104.20.
Sfakianakis added: “If anything, oil is rising so that should be good for the GCC. When oil goes down analysts become bearish. More closely, leading indicators are pointing out to a strong Saudi consumer story as point of sales transactions show a 12 percent growth in volume in January 2014 and more liquidity. There is a real value story in Saudi Arabia that is very different from many emerging markets — certainly events in the Crimea.”
He said: “One should be bullish about the market prospects in Saudi Arabia. If you look at daily traded value it has been rising over the last few days above the $1.2 billion mark. That’s a sign of more liquidity in the market.”
Ihasan Bu-Hulaiga, a Riyadh-based economist, said the Ukraine crisis is developing and it is obvious that there will be impact on global commodities.
However, he said: “The Saudi stock market is not globally exposed. The vast majority of investors are local. It will not have much direct impact on it.”
He said depending on escalation of crisis, things would move in different direction.
Jarmo T. Kotilaine, a regional analyst, said: “Much of what we are seeing right now is driven by the risks associated with the Ukrainian crisis, both the uncertainties are linked – how it will evolve in the regional context and the possible international response. Clearly some of the scenarios being discussed are driving investor anxiety, and risk aversion will probably remain elevated until there is a clearer understanding of how the situation will evolve.”
He said: “The oil market anxiety is linked in part to Russia’s role as a significant producer and exporter. The current tensions and international responses may reduce access to oil or fragment the market, and this is pushing up the risk premium.”
He added: “The gold price gain probably reflects the traditional role of gold as a hedge and a store of value in an uncertain, volatile market environment. There is particular anxiety about natural gas whose price increased sharply as the majority of Russian gas supplied to Europe passes through Ukraine. Any Russian sanctions on Ukraine on steps to demand repayment of debts might complicate Ukraine’s ability to perform this intermediating function.”