MARKET REPORT: Oil stocks sink on Russia-Ukraine tension

Major oil stocks sank as rising tensions between Russia and Ukraine threatened international crude supplies.

Brent crude dropped by over 1.1 per cent to just above $88 a barrel as the ongoing build-up of Russian troops on the Ukrainian border drew condemnation from politicians in both the US and Europe. 

There are worries that a Russian invasion of Ukraine will result in sanctions from the US and other countries in retaliation, which could impact supplies of Russian oil and gas to the wider market. 

Concern: Brent crude dropped by over 1.1 per cent to just above $88 a barrel

Such a move would come at a critical time for global oil supplies, which are currently tight as the economy emerges from the pandemic and fuel demand rises while production remains steady. 

It could also imperil projects run by UK oil majors Shell and BP, both of which have operations in Russia. Shell shares dropped 1.7 per cent, or 30.8p, to 1808.4p as crude prices dipped while BP was down 1.8 per cent, or 6.9p, at 382.25p. 

Neil Wilson, chief market analyst at Markets, noted that a full-scale war between Russia and Ukraine would also cause ‘heavy losses’ for global stock markets. 

The oil stock declines helped push the FTSE 100 into negative territory for 2022 so far, ending the week on a sour note. The blue-chip index closed down 1.2 per cent, or 90.88 points, at 7494.13. 

The FTSE 250 was also on the back foot, tumbling almost 2 per cent, or 451.74 points, to 22263.24. 

Markets in Europe and Asia also saw heavy losses yesterday, with Germany’s Dax dropping 1.9 per cent, while Japan’s Nikkei index slumped 0.9 per cent. 

Market sentiment was weighed down by jitters on Wall Street as a sell-off of tech firms continued. It has been especially punishing for Scottish Mortgage Investment Trust, which counts tech giants such as Tesla and Nvidia among its biggest holdings. Shares in the group were down 3.9 per cent, or 44.5p, to 1109.5p. 

It was followed by other US-focused funds, with Baillie Gifford US Growth Trust sliding 6.7 per cent, or 16.5p, to 230.5p while Allianz Technology Trust, which owns a large stake in Google parent Alphabet, tanked 5.5 per cent, or 16p, to 277p. 

Retailers also fell as sales tumbled by almost 4 per cent in December as Plan B restrictions and Omicron infections slammed the brakes on Christmas spending. 

High street giant Next slumped 1 per cent, or 72p, to 7486p while Dunelm dropped 2.9 per cent, or 39p, to 1292p, B&M fell 2 per cent, or 10.8p, to 543p and JD Sports slipped 1 per cent, or 1.95p, to 192.7p. 

The cautious market mood helped push up prices of some ‘defensive’ stocks, ones with slower share price growth but more reliable dividend payments. 

Lucky Strike cigarette maker BAT climbed 0.8 per cent, or 24.5p, to 3138p and rival Imperial Brands rose 0.4 per cent, or 6.5p, to 1731p. 

Promotional merchandise maker 4imprint edged up 1.7 per cent, or 45p, to 2675p after upping its profit forecasts. The FTSE 250 firm expects profits for 2021 to be ‘towards the upper end’ of expectations, while revenues for the period are due to rise 41 per cent year-on-year to £580m.

Mid-cap merchant bank Close Brothers flagged an expected 2.9 per cent rise in its loan book to £8.7billion for the six months to the end of January, boosted by new business in its asset and motor finance divisions. Assets under management also grew to £16.6billion from £15.6billion at the end of July last year. Shares sank 6.1 per cent, or 82p, to 1266p. 

Ladbrokes-owner Entain dropped 5.2 per cent, or 89p, to 1635p after receiving a mixed reception from two investment banks. 

Analysts at Morgan Stanley upped their target price on the stock to 2530p from 2430p previously, while Deutsche Bank cut theirs to 2354p from 2400p.