HONG KONG: Oil prices broke past $100 and safe havens surged while equities tumbled Thursday after Russian President Vladimir Putin announced a "military operation" in Ukraine, accelerating fears of a major war.
Markets have been hammered this week after the Kremlin recognised two breakaway regions in eastern Ukraine and said it would provide "peacekeepers" to the regions, leading to warnings of a conflagration.
The Russian president said in a surprise statement on television: "I have made the decision of a military operation."
He also vowed retaliation against anyone who interfered and called on the Ukraine military to lay down its arms.
There were later reports of explosions in Kyiv as well as other parts of Ukraine with Moscow saying it was targeting Ukrainian military infrastructure with precision weapons.
Russia is said to have up to 200,000 soldiers massed on the border with Ukraine, and Washington has warned for weeks that Putin was planning an incursion.
Oil prices rocketed more than 5% with Brent moving within spitting distance of the $100 not seen since September 2014, while safe havens surged.
Gold hit its highest since January 2021, while the Japanese yen piled higher against the dollar and the Swiss franc hit a five-year high on the euro.
The dollar was up more than 6% against the ruble, which has been battered in recent weeks on worries about the impact of sanctions on the Russian economy, while the Moscow Stock Exchange said it had suspended trading.
On equity markets, Hong Kong, Sydney, Singapore and Wellington lost at least 3%, while Seoul, Mumbai, Taipei and Manila fell more than 2%. There were also steep losses in Tokyo, Shanghai, Jakarta and Bangkok
"It is hard to find any reasons for the selloff to reverse now that it appears the tanks are rolling," said OANDA's Jeffrey Halley.
"Stronger sanctions are to come on Russia and energy prices will inevitably head higher in the short term."
Ukrainian President Volodymyr Zelensky had earlier warned Russia could start "a major war in Europe" in the coming days.
US President Joe Biden deplored the Russian operation as an "unprovoked and unjustified" attack, adding that it would cause "catastrophic loss of life and human suffering". Further stringent sanctions would be announced, he said.
He was joined by leaders around the world, with NATO ambassadors holding an urgent meeting and the European Union saying Moscow would be held "accountable".
Earlier, the United Nations was told a full-scale Russian invasion would have a devastating global impact that would likely spark a new "refugee crisis".
The threat of a conflagration has sent markets spiralling in recent weeks, with traders fretting over supplies of key commodities including wheat and metals.
"Russia/Ukraine tensions bring both a possible demand shock (for Europe), and more importantly a much larger supply shock for the rest of the world given the importance of Russia and Ukraine to energy, hard commodities and soft commodities," said National Australia Bank's Tapas Strickland.
The crisis comes as governments struggle to contain runaway inflation fuelled by demand as life returns after recent Covid-19 lockdowns, with many fearing the fragile global economic recovery from the pandemic could be knocked off course.
After staging a slight bounce Wednesday in reaction to what were considered light sanctions against Moscow, Asian markets were back in the red after a hefty drop on Wall Street.
- 'Policy mistakes' -
The stand-off in Europe has provided central banks with a further headache as they move to lift pandemic-era financial support and tighten monetary policy.
Attention is on every utterance from Federal Reserve officials as they prepare to hike interest rates next month, with speculation over how fast and hard it will move.
Commentators said bets are on six increases this year, down from previous forecasts for up to seven, and they said the stakes are rising further.
"Policy mistakes at this point in time are almost guaranteed," Shana Sissel of Banrion Capital Management told Bloomberg Television.
"The question isn't, 'Is there going to be a policy mistake?', but, 'How bad will it be? Will the Fed hike too much too fast, will they front-load everything?'"
And with uncertainty reigning supreme, warnings abound of worse to come, with BNY Mellon Investment Management's Lale Akoner saying: "Expect volatility to really persist in the next few months."
Geopolitical risks were flaring at a "very inopportune time", she added, as traders try to navigate central bank tightening.
- Key figures around 0610 GMT -
Brent North Sea Crude: UP 5.5% at $102.20 per barrel
West Texas Intermediate: UP 54% at $97.04 per barrel
Tokyo - Nikkei 225: DOWN 1.8% at 25,970.82 (close)
Hong Kong - Hang Seng Index: DOWN 3.2% at 22,914.50
Shanghai - Composite: DOWN 1.4% at 3,438.79
Dollar/yen: UP at 114.58 yen from 114.96 yen late Wednesday
Euro/dollar: DOWN at $1.1229 from $1.1308
Pound/dollar: DOWN at $1.3493 from $1.3545
Euro/pound: DOWN at 83.20 pence from 83.41 pence
New York - Dow: DOWN 1.4% at 33,131.76 (close)
London - FTSE 100: UP 0.1% at 7,498.18 (close)