by BusinessDesk
The S&P/NZX 50 Index fell 228 points, or 1.9%, to 11,913.27. Turnover was $145 million.
Financial markets have been extremely volatile for the past few weeks as investors navigate the wide-reaching implications of Russia's invasion of Ukraine.
US crude oil prices rose more than 25% last week and traded above US$115 (NZ$166) for the first time since 2008.
Jarden analyst Nik Burns warned there were “significant risks to oil supplies” and “a number of credible scenarios” that could result in prices above US$150 a barrel.
“Our base case is now for Brent to average US$100 in 2022, with a high-side scenario of US$130 and low side of US$90,” they said.
Hong Kong stocks plunged to their lowest level in more than five years with investors concerned the war in Ukraine will worsen inflation.
Greg Smith, head of retail at Devon Funds, said equity markets were reflecting the fact that more than half of Russian oil cannot be bought, despite not being directly sanctioned.
“With temperatures rising in Ukraine, this could all mean that crude oil may march further towards US$150 a barrel, which would dampen economic growth and also drive further inflation,” he said.
The few NZX-listed oil stocks were high on the shortlist of stocks that made gains today.
NZ Refining and NZ Oil & Gas each rose 1% to $1.01 and 51.5 cents, respectively.
Genesis Energy, which co-owns the Kupe oil and gas field, held up better than most other stocks, declining just 0.3% to $2.89.
Smith said the company would be benefitting from the high energy prices while other electricity generators – which are mostly clean energy – would not be.
Infrastructure investor Infratil – which owns clean energy assets in Europe and the US – did not follow the worst falls, it dropped just 0.4% to $8.19.
“In general, both EU and US bank stocks get slashed due to their exposure to Russia’s bond markets, while energy outperforms with surging oil and gas prices,” said Tina Teng, an analyst at CMC Markets.
Serko led the local market lower, falling 6.8% to $4.50. Mainfreight shares dropped 5.3% to $78.15 and Air NZ declined 3.6% to $1.465.
Oil prices could raise the cost to consumers for all three businesses and ultimately lead to less demand.
Carbon Fund units also dropped 5.4% today, with investors likely predicting higher oil prices will lead to less consumption and lower emissions.
Spark NZ fell 1.5% and SkyCity Entertainment fell 3% to $2.89 after index builders S&P Dow Jones announced they would both be dropped from the benchmark Australian index on March 21.
The NZ dollar continued to climb, encouraged by high commodity prices despite investors avoiding risk.
Prices of crude oil, metals such as aluminium and food types such as wheat rocketed last week in one of the largest surges since the oil crisis in 1974.
The NZ dollar was trading at 68.88 US cents, up from 67.08 just a week ago.
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