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LONDON — Oil prices surged while stock markets fell on Wednesday on renewed fears over Russian energy supplies and soaring inflation.

Crude futures jumped more than four per cent with Brent North Sea, the international benchmark, exceeding $120 per barrel.

Russian Deputy Prime Minister Alexander Novak on Wednesday warned that a ban on Russian oil and gas imports over the Ukraine war — which some EU countries are demanding — would drive the world's energy markets to a "collapse". 

"It is absolutely obvious that without Russian hydrocarbons, if sanctions are introduced, there will be a collapse of the oil and gas markets," Novak told Russia's lower house State Duma as reported by Russian news agencies.

"The rise in energy prices may be unpredictable," Novak added.

Russia’s President Vladimir Putin, meanwhile, hit back at "unfriendly countries" — which include EU members — as he announced that Russia will now only accept rubles for gas deliveries.

Russia also warned that repairs at a terminal near a Black Sea port may take up to two months and lead to a drop in oil exports of about one million barrels per day.

Moscow could face more sanctions as US President Joe Biden left on Wednesday for Europe on a mission to bolster Western unity against Russia.

Inflation and war 

On stock markets, London's benchmark FTSE 100 index was down 0.2 per cent in afternoon trading as British finance minister Rishi Sunak said the UK economy would grow far slower than expected this year due to the Ukraine war and soaring global inflation.

In Frankfurt, the DAX was 1.5 per cent lower while the Paris CAC 40 was shedding 1.3 per cent.

Wall Street was lower in morning deals.

"The markets continue to contend with the uncertainty regarding the ongoing war in Ukraine, and persistently elevated and broad-based inflation pressures," analysts at Charles Schwab investment firm said in a note.

Sunak launched plans to ease a cost of living crisis, with UK inflation set to spike to a 40-year high on Ukraine fallout. 

"Today's data confirm a worsening squeeze on consumer incomes," said Yael Selfin, chief economist at KPMG UK.

"These price rises were dominated by increases in energy, and we expect further rises this year as global energy, food, and other commodities markets are impacted by Russia's invasion of Ukraine."

Asian stock markets closed higher after a Wall Street rally the day before.

US shares had risen Tuesday on optimism that the Federal Reserve's plan to hike interest rates would help to bring inflation under control.

While there remains plenty of concern about the war in Ukraine, analysts said some confidence had seeped back into trading floors as investors bet on consumer resilience and economies continue to reopen.

"There is a narrative taking root that the bad news is priced in," said Briefing.com analyst Patrick O'Hare.

Federal Reserve boss Jerome Powell this week said that the US central bank was prepared to act more aggressively on lifting borrowing costs should American inflation — already at a 40-year high — not fall quickly enough.

Officials lifted US rates last week by a quarter of a point but some have advocated bigger increases, a view Powell suggested he was open to believing that the world's biggest economy was strong enough to withstand such a move.

LONDON — British Finance Minister Rishi Sunak on Wednesday launched plans to ease a cost of living crisis, with growth set for a massive slowdown as the war in Ukraine and decades-high inflation pummel the economy.

In a budget update, Chancellor of the Exchequer Sunak unveiled measures to help household finances, including a cut on fuel duty and easing the tax burden for the lowest earners.

He also pledged to cut income tax in 2024, which is the last year when the next general election can be called by Conservative Prime Minister Boris Johnson.

Britain's economy will grow far slower than expected this year owing to the Ukraine war and soaring global inflation, Sunak told parliament.

The UK economy was set to grow 3.8 per cent in 2022, down from an official estimate of six per cent made in October.

'Prepare for worse' 

Sunak said that the Office for Budget Responsibility (OBR) — the government's official economic forecaster — "has not accounted for the full impacts of the war in Ukraine and we should be prepared for the economy and public finances to worsen, potentially significantly".

"Their initial view, combined with high global inflation and continuing supply chain pressures means" the UK economy is forecast to grow significantly slower than thought.

Gross domestic product was estimated to expand a further 1.8 per cent next year, down from an official prediction of 2.1 per cent.

The OBR warned that should "wholesale energy prices remain as high as markets expect, energy bills are set to rise... pushing inflation to a 40-year high of 8.7 per cent in the fourth quarter".

UK annual inflation accelerated to a 30-year high at 6.2 per cent in February, official data showed on Wednesday.

Countries across the world are battling surging inflation fuelled by rocketing commodity prices over the Ukraine war and after nations exited pandemic lockdowns.

Sunak last month unveiled a package worth £9 billion ($11.9 billion, 11 billion euros) to help millions of low and middle-income households with energy bills, in particular.

Many household incomes are set to shrink further in April owing to a planned tax hike on UK workers and businesses to fund care for the elderly.

The same month, a cap on domestic gas and electricity bills will be increased because of a spike in wholesale energy costs.

Wage erosion 

While Sunak has been comforted by news that UK unemployment has fallen to pre-pandemic levels, rising wages are being eroded at the fastest pace in eight years as inflation soars.

"Higher inflation will erode real incomes and consumption," the OBR said.

It said that "with inflation outpacing growth in nominal earnings and net taxes due to rise in April", real living standards are set to fall by a record amount this year.

The main opposition Labour party attacked Sunak for failing to help all financially-struggling families.

"For all his words it is clear that the chancellor does not understand the scale of the challenge," Rachel Reeves, finance spokesperson for the main opposition Labour party, said in response to the budget update.

"He talks about providing security for hard-working families but his choices are making the cost of living crisis worse."

Spiking global inflation has forced central banks around the world to lift interest rates, including the Bank of England.

Rising interest rates are significantly increasing governments' debt repayments, which ballooned over the past two years on vast pandemic costs.

BERLIN — Tesla CEO Elon Musk danced for joy at the inauguration of his "gigafactory" electric car plant near Berlin on Tuesday, shrugging off two years of bureaucracy and delays to watch customers drive off with the first Model Y vehicles made in Europe.

"Danke Deutschland!" (Thank you, Germany) Musk tweeted after the red ribbon ceremony, where he joined workers in applauding the first 30 drivers to get behind the wheel of their new cars.

The US billionaire even broke into a little dance during the handovers, reviving memories of the slightly awkward jig he did at a launch event in Shanghai in 2020 that lit up the internet.

The factory opening caps an arduous two-year approval and construction process that saw Tesla run into a series of administrative and legal hurdles, including complaints from locals about the site's environmental impact.

Having started construction at its own risk, Tesla finally won the formal go-ahead from regional authorities to begin production earlier this month.

The "gigafactory" in Gruenheide, in Germany's eastern state of Brandenburg, is Tesla's first production site in Europe, and officials are hoping it will help the region position itself as a hub for electric vehicle production.

The Californian company aims to eventually employ some 12,000 workers at the site who will churn out around 500,000 Model Y cars annually, the firm's all-electric, compact SUVs.

Tesla's arrival is expected to jolt Germany's flagship car industry, setting the stage for fierce competition with rivals Volkswagen, BMW and Mercedes-Benz as they pivot from traditional engines to cleaner electric vehicles.

"The new era in the auto industry has now arrived in Germany too," said analyst Ferdinand Dudenhoeffer from the Centre for Automotive Research.

Away from Russian oil 

Tesla's focus on Europe comes as the continent grapples with sky-high energy costs that have sent petrol prices soaring, prompting some drivers to take a closer look at electric alternatives.

The "Giga Berlin-Brandenburg" is "one of the biggest strategic endeavours for Tesla over the last decade and should further vault its market share within Europe over the coming years as more consumers aggressively head down the EV path", analysts at investment firm Wedbush said.

But Tesla has not been spared the pain from shortages of key materials and supply chain disruptions, linked in part to Russia's invasion of Ukraine, that are also plaguing other carmakers.

Last week, Musk tweeted that the company was seeing "significant recent inflation pressure" in raw materials and logistics.

'Special day' 

Economy Minister Robert Habeck, who attended Tuesday's inauguration along with Chancellor Olaf Scholz, said it was "a special day for Germany's mobility transformation".

In a nod to efforts to reduce reliance on Russian energy, Habeck said electric cars took Germany "one step further away from oil imports".

He also called for more "Tesla speed" in other infrastructure projects, including the expansion of renewable energies.

Although Musk was frequently frustrated by the red tape that slowed down his Gruenheide plans, by German standards the factory was up and running in record time.

The inauguration was not universally welcomed, however, with environmental campaigners protesting near the site. 

Among their demands was a call for better and free public transport instead of "yet more cars", said spokeswoman Lou Winters from the Sand in the Gears environmental group.

LONDON — Stock markets rose while oil prices steadied on Tuesday as investors tracked developments in the war in Ukraine and digested the US Federal Reserve (Fed) chief's warning of a possible sharp interest rate hike.

Crude futures had soared more than seven per cent on Monday on supply worries as European leaders debated banning imports from Russia, but they were more or less flat in Tuesday trading.

Wall Street advanced around 0.8 per cent in early deals, mirroring similar rises on main European markets.

Some EU states want to ramp up pressure on Russian President Vladimir Putin with energy sanctions, though others, including Germany — hugely reliant on Moscow's fuel — have been reluctant to target the key sector. 

Adding to the price pressure, Saudi Arabia warned that Yemeni rebel attacks on its oil facilities are a "direct threat" to global supplies, after Red Sea facilities belonging to giant Saudi Aramco were targeted.

"Despite some optimism seen across markets resulting from the potential of peace talks between Russia and Ukraine, the oil market remains one of the most volatile," noted Walid Koudmani, chief market analyst at XTB.

Soaring oil prices have been a driver of turmoil on world markets in recent weeks as demand surges also as economies reopen from pandemic lockdowns.

That, along with a spike in the cost of other key commodities, such as metals and wheat on the Ukraine conflict, has sent global inflation rocketing and caused central banks to hike interest rates.

There is a growing fear that the global economy could endure a period of stagflation whereby prices soar but growth stalls.

Rising rate 

Fed chair Jerome Powell on Monday indicated the US central bank could lift borrowing costs faster than market expectations to keep a leash on inflation.

The yield on the 10-year US Treasury note — a proxy for interest rate expectations — jumped further above two per cent as traders bet on aggressive Fed rate hikes in the coming months.

"The battle of rate-hike expectations will be waged all year," said Briefing.com analyst Patrick O'Hare.

"Thus far, it has been the root of volatility in the capital markets as participants have been attempting to assess the ultimate impact of the Fed removing its policy accommodation on the path of the economy, inflation, and earnings," he said.

Regarding the Ukraine war, the Kremlin on Tuesday said it would like negotiations with Kyiv aimed at ending Russia's military action to have more substance.

The two sides are holding negotiations remotely after several rounds of talks between delegations meeting on the border between Belarus and Ukraine.

So far, the talks have yielded little progress, with both sides blaming the other, and none has been at the presidential level. 

Ukrainian President Volodymyr Zelensky renewed an offer of direct peace talks with Putin late Monday.

In Asia, Hong Kong's main stocks index ended sharply higher, resuming last week's rally sparked by China's pledge to support the country's markets and indicated a tech crackdown was nearing an end.

HONG KONG — Chinese developer Evergrande said on Tuesday it is investigating how lenders have laid claim to deposits valued at more than 13.4 billion yuan ($2.1 billion) for its subsidiary, the latest black mark against the debt-ridden property giant.

Beijing's drive to curb excessive debt in the real estate sector has embroiled Evergrande, one of the country's largest developers, which has been struggling after racking up $300 billion in liabilities. 

It announced on Tuesday that one of its key units Evergrande Property Services Group had about $2.1 billion in cash that banks have laid claim to as security guarantees via a third party, a discovery made when the company was doing its annual report.

"In the review of its financial report for the year ended 31 December 2021, [the subsidiary] found that deposits of approximately RMB13.4 billion as security for third party pledge guarantees had been enforced by the relevant banks," the company said in an announcement on the Hong Kong Stock Exchange. 

"[Evergrande] considers that this is a major incident and has established an independent investigation committee to assess the implication of the incident." 

Another committee for the property subsidiary will "investigate the pledge guarantees" to its lenders.

The statement does not provide details on which banks had enforced the pledges. 

This revelation adds to the financial woes of Evergrande, which international ratings firms in December had labelled as being in default after it had failed to repay liabilities on time. 

The company also said on Tuesday it would not be able to publish its 2021 audited results by the end of March — as Hong Kong's listing rules require — blaming the delay on COVID-19.

"Due to the drastic changes in the operational environment of the Company since the second half of last year... coupled with the effect caused by the COVID-19 outbreak... the Company will not be able to complete the audit procedures on time," it said in a separate announcement.

It added that the suspension in its share trading — which had halted Monday — will remain in force until further notice. 

It urged investors to exercise caution "in view of the operational and financial challenges the group is facing and in particular the debt pressure it is experiencing".

Monday's suspension is the second one this year. 

The company has repeatedly said it will finish its projects and deliver them to buyers in a desperate bid to salvage its debts, and had asked its creditors to give them time. 

Earlier struggles to pay suppliers and contractors due to the crisis led to protests from homebuyers and investors at the group's Shenzhen headquarters in September.

Evergrande's woes have had knock-on effects throughout China's property sector, with some smaller firms also defaulting on loans and others struggling to find enough cash. 

In January, the International Monetary Fund warned that the property funding crisis could have spillover effects on the broader economy and global markets.

LONDON — Oil prices soared on Monday as a weekend attack on Saudi facilities and EU discussions on banning Russian crude raised concerns over global supplies.

Top producer Saudi Arabia warned that Yemeni rebel attacks on the kingdom's oil facilities pose a "direct threat" to global supplies, the comments helping Brent North Sea crude surge 7 per cent to $115.49 per barrel with WTI rising 6 per cent to $110.99.

Wall Street dipped 0.8 per cent mid session as did the tech-heavy NASDAQ and European equities ended slightly in the red — though London had added half a per cent at the close — after Ukraine rejected a Russian ultimatum to surrender its besieged southern city of Mariupol.

"Oil prices are up noticeably as the new week of trading begins," noted Commerzbank analyst Carsten Fritsch even prior to the Saudi comments.

"The reason for the upswing is news that the EU appears to be considering a ban on oil imports from Russia," he added.

"We saw what happened when the US first floated the idea of the EU banning imports alongside it and if this becomes a realistic prospect, we could see oil prices rising much further," said OANDA analyst Craig Erlam.

"The Saudi news could also be contributing to the price rise although the country has ample spare capacity and there have been reassurances that there are sufficient contingency plans in place to ensure contracts are fulfilled. So that remains a much smaller upside risk for prices for now," Erlam added.

EU foreign ministers were meanwhile meeting to discuss imposing additional sanctions against Moscow, with a raft of countries pressing for a ban on Russian energy. Germany, however, is reluctant given its huge reliance on Russian gas.

Kremlin spokesman Dmitry Peskov warned that an oil embargo "is a decision that will hit everyone".

Drone strike 

Also pushing up crude futures was the attack by Yemeni rebels on facilities belonging to oil giant Saudi Aramco.

"As war rages in Ukraine, another protracted conflict is also adding to the nervousness around the oil price after Houthi rebels attacked a refinery in Saudi Arabia," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"It's officially a temporary outage but still has undermined the effect of Saudi Aramco's pledge to ramp up production in coming years."

Drone and missile strikes by Yemen's Iran-backed Houthi rebels at the weekend caused no reported casualties.

The drone assault on the YASREF refinery in Yanbu Industrial City on the Red Sea "led to a temporary reduction in the refinery's production, which will be compensated for from the inventory", the Saudi energy ministry said.

The Saudi-led military coalition that backs Yemen's government said it intercepted and destroyed ballistic missiles and drones launched towards Jizan and other areas in the kingdom, causing "damage" to several sites.

The Saudi foreign ministry said the kingdom "will not incur any responsibility" for shortages in oil supplies in light of the Huthi attacks but noted a "direct threat to the security of oil supplies in these extremely sensitive circumstances witnessed by the global energy markets".

Saudi Aramco on Sunday reported a 124 per cent surge in annual net profit owing to soaring oil prices that is fuelling inflation worldwide, in turn pushing central banks to raise interest rates that could hinder the economy's growth recovery according to experts.

Traders were cautious as they drank in the latest events affecting markets.

European and Asian stock markets were steadier after recent sharp swings, "not because views on geopolitical or policy/rates risk have improved but because price action shows a market more tolerant of those challenges", said Stephen Innes of SPI Asset Management.

RIYADH — Oil giant Saudi Aramco on Sunday reported a 124 per cent net profit surge for last year, in results released hours after its facilities were hit by Yemeni rebel drone and missile strikes.

As the world economy started to rebound from the COVID pandemic, "Aramco's net income increased by 124 per cent to $110 billion in 2021, compared to $49 billion in 2020," the company said.

The results followed news of the overnight attacks by Yemen's Iran-backed Houthi rebels, which caused no reported casualties but hit targets including Aramco facilities and a water desalination plant.

The attacks "led to a temporary reduction in the refinery's production, which will be compensated for from the inventory", said the Saudi energy ministry in a statement on state media, without providing numbers.

The Saudi-led military coalition which backs Yemen's government said it intercepted and destroyed ballistic missiles and drones launched towards Jizan and other areas in the kingdom, causing "damage" to several sites.

"Initial investigations indicate the militia used Iranian cruise missiles that targeted Al Shaqeeq desalination plant and Aramco's Jizan bulk plant," it said in a statement. 

Targets included a Dhahran Al Janoub power station, an Aramco gas plant in Yanbu and a gas station in Khamis Mushait, it said.

The Houthis confirmed they had launched the drone and missile attacks targeting a number of "vital and important" sites, including Aramco facilities.

In 2019, Houthi-claimed aerial assaults on two Aramco facilities in eastern Saudi Arabia temporarily knocked out half of the kingdom's crude production.

The Saudi energy ministry said in its statement the attacks had targeted a gas plant and the YASREF refinery, which produces 400,000 barrels per day according to its website, in the Yanbu Industrial City on the Red Sea.

'Geopolitical factors'

The kingdom, one of the world's top crude exporters, has been under pressure to raise output as Russia's invasion of Ukraine and subsequent sanctions against Moscow have roiled global energy markets.

Oil-rich Gulf countries, including Saudi Arabia, have so far resisted the pressure, stressing their commitment to the OPEC+ alliance of oil producers led by Riyadh and Moscow. 

Aramco president and CEO Amin Nasser cautioned that the company's outlook remained uncertain due in part to "geopolitical factors". 

Alluding to the effect price spikes have had on consumers, he noted that "energy security is paramount for billions of people".

"We continue to make progress on increasing our crude oil production capacity, executing our gas expansion programme and increasing our liquids to chemicals capacity," Nasser added.

On the latest results, for 2021, he acknowledged that "economic conditions have improved considerably".

The oil giant had in 2019 achieved a net income of $88.2 billion before the pandemic hit global markets, resulting in huge losses for the energy and aviation sectors, among others.

A strong rebound last year saw demand for oil increase and prices recover from their 2020 lows. 

Brent crude has repeatedly spiked above $100 per barrel lately, driven by supply concerns centred on Russia's invasion of Ukraine.

Saudi Aramco also said capital expenditure in 2021 was up 18 per cent on 2020 at $31.9 billion, a figure it expected to raise to approximately $40 billion-50 billion this year, before further growth. 

Saudi Arabia has sought both to open up and diversify its oil-reliant economy, especially since Mohammed Bin Salman's appointment as crown prince in 2017. 

Aramco floated 1.7 per cent of its shares on the Saudi bourse in December 2019, generating $29.4 billion in the world's biggest initial public offering.

In February, the kingdom shifted 4 per cent of Aramco shares, worth $80 billion, to the country's sovereign wealth fund — a move seen as a possible prelude to further opening up the oil giant.

CAIRO — Soaring bread prices sparked by Russia's invasion of Ukraine have bitten into the purchasing power of consumers in Egypt, a leading importer of wheat from the former Soviet states.

For the first time since he took office, President Abdel Fattah Al Sisi on Tuesday ordered a price cap on unsubsidised bread after the cost of the Egyptian staple rose by as much as 50 per cent.

The move is meant to cushion the invasion's impact on a country where, according to Michael Tanchum of the Middle East Institute, "keeping the price of Egypt's staple food affordable has been the bedrock of regime stability" for 60 years.

A fortnight ago, 1,500 Egyptian pounds ($95) was enough for Shaimaa Mohamed to buy a month's worth of groceries. Now, the mother of three says it is barely enough for two weeks.

Mohamed warned her children that the family would have to tighten its purse strings after a kilogramme of rice went from eight to 12 pounds seemingly overnight.

"I was in the same store 15 days ago, and today for the same price I have only filled half of my shopping cart. What happened?" she said.

The answer lies thousands of kilometres away in Ukraine, once known as "the bread basket of Europe".

Russia invaded its neighbour on February 24, causing the price of grain, oil and other essential commodities to climb worldwide.

'Existential threat' 

"In Egypt, prices of wheat and sunflower oil have escalated due to Egypt's reliance on Russia and Ukraine for 85 per cent of its wheat supply and 73 per cent of its sunflower oil," the UN's International Fund for Agricultural Development said on Thursday.

Per capita bread consumption in the country is almost 130 kilogrammes per year, well above the world average, according to official figures.

The North African country's popular flatbread, which has increased from one pound to 1.25 per loaf, is considered a litmus test for the economy.

Concerns have heightened as Egypt — a country where a third of the 103 million-strong population lives in poverty — gears up for Ramadan, which begins in April.

Consumption usually rises as households stock up for the month, but with inflation at a three-year high of 10 per cent in February, the situation is looking bleak in the final weeks before the country's Muslims start fasting.

Bankers JPMorgan have stirred talk of an anticipated devaluation of the Egyptian pound, which would be the second within six years.

Egypt's poor and working class shouldered the burden in 2016, when a slate of austerity measures — including a 50 per cent currency devaluation and subsidy cuts — were enforced to secure a three-year, $12-billion bailout loan from the International Monetary Fund.

Food insecurity in Egypt poses "an existential threat to its economy", according to the Middle East Institute.

Bakery boycott 

In efforts to mitigate the shock of the ongoing crisis, the government announced last week a $1 billion increase to the state's wheat provision bill.

Of the state's $5.5 billion budget for food subsidies, 57 per cent is dedicated to bread, and 70 per cent of Egyptians depend on this.

On Tuesday, Sisi directed the government to set a cap on the price of unsubsidised bread, after private bakeries hiked prices by as much as 50 per cent last week.

Prime Minister Mostafa Madbouli lectured traders last week, calling on them "not to exploit the situation", while asking Egyptians "to ration their consumption to limit the recourse to world markets" where prices are skyrocketing.

State media says authorities have seized thousands of tonnes of goods, launched legal proceedings against dozens of traders and shut down businesses for allegedly manipulating prices in recent days.

Businesses are not the only reason prices are going up, according to Islam Mohamed, marketing manager at a food import company.

"The cost of transporting and unloading cargo from Europe has gone up 30 per cent because of the price of oil," he said. "That will be reflected in consumer prices."

In his affluent neighbourhood on Cairo's western outskirts, "some people suggested boycotting the bakeries that raised the price of bread", the 34-year-old noted.

Most residents, however, shared a sense of resignation.

"Rising costs have hit everything. What would be the point of a boycott?"