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Europe Markets: Shell a lone bright spot as European stocks tumble, energy prices soar on Russia-Ukraine tensions

European stocks tumbled Tuesday, in step with a global selloff as Ukraine-Russia tensions ratcheted up, driving up energy prices and the stocks of related companies, such as Shell and BP.

Hopes for a diplomatic solution were fading and fears of a Ukraine invasion rising after Russian President Vladimir Putin on Monday ordered troops into separatist regions of that country and said he would recognize their independence.

The Stoxx Europe 600
SXXP,
-0.80%

fell 1.4% to 448.38, after those geopolitical tensions knocked 1.3% off the index Monday.

U.S. stock futures
ES00,
-1.30%

YM00,
-1.06%

NQ00,
-2.07%

were also under sharp selling pressure, while Russia’s MOEX stock index was last down 5%. The ruble
USDRUB,
-0.19%

was trading at a low not seen since early 2020, beyond 80 per dollar.

Hurting even worse was the German DAX
DAX,
-1.21%
,
down nearly 2%, due to the country’s heavy dependence on Russian gas. The French CAC 40
PX1,
-0.89%

was off 1.4% and the FTSE 100
UKX,
-0.53%

fell close to 1%.

Read: What a Russian invasion of Ukraine would mean for markets as Putin orders troops to separatist regions

European natural-gas prices, based on the Dutch benchmark Title Transfer Facility (TTF), surged 8%. With the worst of the winter months nearly over, President Ursula von der Leyen said over the weekend that Europe can get by in case of “full disruption” from Gazprom.

Still, higher prices will add more pressure on already elevated inflation around the world.

“In normal times, central banks would tend to look through an energy-led rise in inflation, but given the current high rates of inflation, and corresponding concerns about it feeding higher inflation expectations, it’s possible that this adds to the list of reasons for policy makers to raise interest rates,” said Neil Shearing, group chief economist at Capital Economics, in a note to clients.

Fears of geopolitically-driven supply disruptions drove U.S.
CL00,
+4.88%

and Brent crude futures
BRN00,
+3.86%

5% and nearly 4% higher, respectively. Among a handful of gainers in Europe Tuesday, shares of energy giants Shell
SHEL,
+2.09%

SHEL,
-0.73%

and BP
BP,
+1.30%

BP,
-1.61%

were up around 1% each.

Banks and pharmaceutical companies were among the biggest decliners. Shares of HSBC
HSBC,
+0.85%

HSBA,
-1.54%

fell 1% after the banking giant said fourth-quarter profit more than tripled from a year earlier, but warned of lingering risks from China’s troubled real-estate sector.

Shearing said losses seen by global equity markets this year have largely been due to fears over hawkish central banks, meaning threat of a conflict in Eastern Europe may not be priced in. It could end up erasing Europe’s slim outperformance over the U.S. so far this year.

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