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EU equities plunged on Monday after Russia said it was cutting off Nord Stream 1 gas supply indefinitely.
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The Stoxx Europe 600 dropped 1.2%, with chemical companies and automakers among the hardest hit.
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The euro’s further decline also comes against the backdrop of rising social unrest across the European Union.
European stocks and the euro fell on Monday morning while natural gas prices skyrocketed after Russia said it was cutting off gas supplies through the Nord Stream 1 pipeline indefinitely.
The Stoxx Europe 600 dropped 1.2%, with chemical companies and automakers among the hardest hit. Of the major regional indexes, the German DAX fell 2.7%; the French CAC 40 declined 1.9%, while the oil-producer heavy U.K. FTSE 100 weakened by 0.7%. Meanwhile, Dutch TTF gas futures rocketed a massive 26%, while the euro slipped 0.4% to $0.9916 to trade below 99 cents for the first time in 20 years.
On Friday, Gazprom shut Nord Stream indefinitely after claiming it had found an oil leak at a vital pipeline turbine, blaming Western sanctions and vowing to keep the pipeline offline until sanctions were lifted.
That announcement follows a G7 announcement of an agreement to implement a price cap on Russian oil by December, with Moscow responding by threatening to stop selling oil to any country that supports price caps.
“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports. It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side,’’ J.P. Morgan analysts have said. It is worth remembering that JPM forecast earlier this summer that crude oil prices could skyrocket to as high as $380/bbl if Vladimir Putin retaliated G-7’s price cap on Russian oil with production cuts.
The euro’s further decline also comes against the backdrop of rising social unrest across the European Union, with mass protests–70,000 strong–in the Czech Republic on Saturday highlighting the increasing severity of an energy crisis that is striking hard at costs of living.” NB: Alex Kimani wrote this article for Oilprice.com
