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What do oil and gold gains mean for stock prices?

gold being poured into bars

Both Brent crude oil and WTI prices continue to gain as the US and Europe contemplate a ban of Russian oil imports. Russia’s invasion of Ukraine brought sanctions, but the allies are investigating ways to further punish Russia via economic means with the goal being to isolate Russia so it cannot finance the conflict.

However, a boycott would put enormous pressure on oil and gas supply that has already felt the impact of increasing demand after the reopening of businesses and borders following the worst of the coronavirus pandemic and already tight supply.

Prices are likely to rise in the short term, with a move toward US$150 a barrel not out of the question. Such a move will put further pressure on global economies, pushing inflation higher, leaving central banks debating how quickly rate hikes should be implemented.

ASX stocks and the Russia-Ukraine crisis

The S&P/ASX 200 Energy [XEJ] is up 13% over the past five days. Energy stocks such as Santos, Woodside and Beach Energy share prices have gained as crude oil prices hit records not seen for a decade. The highest recorded price per barrel maximum of US$147.02 was reached on July 11, 2008.

Santos is 11% higher over the past five trading sessions, Woodside is 10% higher over the same period and Beach Energy has gained 13%.

Gold producers are seeing share price gains as the spot price of the precious metal increases with investors rushing to buy safe haven assets. Spot gold edged above US$2000 an ounce, the highest since August 2020.

On the ASX, Northern Star is up almost 30% in the past month as gold has staged its massive rally. Evolution Mining is up 21% in the same period and Newcrest is up 22% in a month.

The ASX dropped to an intraday low on Monday of 7010.50 and closed for the day down 1% at 7038.60, with travel-related stocks and technology shares the hardest hit. The Australian dollar is holding above US74c.

Beyond the ASX

Companies with defence contracts with the US government have gained in stock price since the conflict started on 24 February 2022.

American aerospace, arms, defence, information security, and technology corporation Lockheed Martin is up 17% in the past month and 30% year to date.

However, airliner Boeing, which designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles, has seen a dip in its share price year to date, down 13%, much of that fall coming in the past few sessions.

Energy sector ETFs are reaching new multiyear highs as the conflict between Russia and Ukraine intensifies.

The Energy Select Sector SPDR Fund (XLE) hit highs not seen since 2018 last Thursday. The SPDR S&P Oil & Gas Exploration and Production ETF (XOP) climbed to levels not seen since 2019.

ETF volumes on the whole nearly doubled their historical 20-day average when Russia first invaded Ukraine on February 24, according to State Street Global Advisors.

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