Stocks fall; oil, wheat prices jump after Ukraine attack

NEW YORK — (AP) — Stocks fell worldwide on Thursday after Russia’s attack of Ukraine sent fear coursing through markets and upped the pressure on the high inflation already squeezing the global economy.

On Wall Street, the S&P 500 sank 1.5% to continue its dismal start of the year, though the loss moderated after starting the day at 2.6%. The benchmark index is now down 13.3% from its record set early this year. Stocks in Europe sank even more after officials called Russia's moves a "brutal act of war," with the German DAX down 4%.

Beyond its human toll, the conflict looks set to send prices spiraling even higher at gasoline pumps and grocery stores around the world. Russia and Ukraine are major producers not only of energy but also grains and various other commodities. War could upend global supplies, as could sanctions brought by the United States and other allies.

Oil prices on both sides of the Atlantic jumped toward or above $100 per barrel to their highest levels since 2014, up about 6%. Wholesale prices also shot higher for heating oil, wheat and other commodities. The spot price in Europe for natural gas, for which the continent relies on Russia to supply, jumped as much as 31%.

Increases in energy and food prices could amplify worries about inflation, which in January hit its hottest level in the United States in a couple generations, and what the Federal Reserve will do in turn to rein it in. The Fed looks certain to remove the super-low interest rates that investors love, which also helped catapult financial markets and the economy out of their coronavirus-caused plunge. The only question has been how quickly and how aggressively the Fed will move, starting next month.

Stocks pared their losses through Thursday morning as investors debated whether Russia's aggression could make the Fed less aggressive about raising rates. In the past, it has delayed big policy decisions amid uncertainty about the Kosovo war and the U.S. invasion of Iraq, for example, according to Goldman Sachs.

But economists at the bank say they still expect the Fed to raise rates steadily at their upcoming meetings. The Ukraine tensions probably just make it less likely the Fed will start the process off with a bigger-than-usual increase in rates, something that a couple Fed officials had suggested.

Many investors also said that past global events, such as an invasion, have had only short-term effects on markets that last a few weeks or months.

Regardless, bond yields sank in the meantime around the world, a sign that investors were scrambling into anything that may offer safer returns than stocks and other riskier bets. The yield on the 10-year U.S. Treasury fell to 1.92% from 1.97% late Wednesday. Gold also rallied and rose 0.5%, continuing its strong run on worries about Russia and Ukraine.

On Wall Street, worries about higher interest rates have delivered the heaviest hits on big technology stocks, a turnaround after those companies soared to lead Wall Street out of its coronavirus-caused plummet in 2020.

The Nasdaq composite, which is full of big tech stocks, sank 1% and could close more than 20% below its record set on Nov. 19. If it does, that's something Wall Street calls a “bear market,” something that hasn't happened for the Nasdaq since the coronavirus first crashed the global economy.

The Dow Jones Industrial Average fell 698 points, or 2.1%, to 32,433, as of 10:32 a.m. Eastern time.

Financial markets are in a “flight to safety and may have to price in slower growth” due to high energy costs, Chris Turner and Francesco Pesole of ING said in a report.

In Brussels, the president of the European Commission said Thursday the 27-nation European Union planned “massive and targeted sanctions” on Russia.

“We will hold President Putin accountable,” Ursula von der Leyen said.

The FTSE 100 in London fell 3.3% after Europe awakened to news of explosions in the Ukrainian capital of Kyiv, the major city of Kharkiv and other areas. The CAC 40 in Paris lost 3.7%.

Moscow’s stock exchange briefly suspended trading on all its markets on Thursday morning. After trading resumed, Russian indexes plunged by more than a third.

Some analysts expect the conflict to push investors out of many tech stocks, with the exception of the cybersecurity sector.

“Growing concern that massive cyber warfare could be on the near-term horizon which would certainly catalyze an increase in spending around preventing sophisticated Russian-based cyber attacks,” analysts with Wedbush Securities wrote in a note to clients.

Putin said Russia had to protect civilians in eastern Ukraine, a claim Washington had predicted he would make to justify an invasion.

President Joe Biden denounced the attack as “unprovoked and unjustified” and said Moscow would be held accountable, which many took to mean Washington and its allies would impose additional sanctions. Putin accused them of ignoring Russia’s demand to prevent Ukraine from joining NATO and to offer Moscow security guarantees.

Washington, Britain, Japan and the EU earlier imposed sanctions on Russian banks, officials and business leaders. Additional options include barring Russia from the global system for bank transactions.

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AP Business Writers Christopher Rugaber and Joe McDonald contributed.

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