By Peter Nurse
Investing.com - European stock markets are expected to open lower Monday, with sentiment dented by higher oil prices and as the conflict in Ukraine rages on.
At 3:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.8% lower, CAC 40 futures in France dropped 0.8% and the FTSE 100 futures contract in the U.K. fell 0.6%.
The conflict triggered by Russia’s invasion of Ukraine on Feb. 24 is entering its fifth week. Diplomacy efforts are ongoing, with Turkey's foreign minister stating on Sunday that the two sides were nearing agreement on "critical" issues, but the fighting continues, particularly around the south-eastern Ukrainian city of Mariupol.
U.S. President Joe Biden is set to arrive in Brussels on Thursday for summits with the members of NATO, as well as the European Union governments to discuss their response to Russia’s aggression. Ahead of this the EU will meet to consider whether to join the United States in imposing an oil embargo on Russia.
The West has already imposed a number of punishing sanctions on Moscow for its invasion, including a freezing of the assets of the Russian central bank. These moves have yet to persuade Russian President Vladimir Putin to stop the fighting, and the obvious next move is for the bloc to target Russian oil.
This would be an economically tough choice, as the EU relies on Russia for 40% of its gas, with Germany the most dependent of the bloc's large economies.
Oil prices jumped Monday as a result, while a weekend attack on Saudi oil facilities also caused supply jitters with the Saudi Aramco (SE:2222) refinery joint venture in Yanbu seeing a temporary drop in output.
By 2:05 AM ET, U.S. crude futures traded 3.3% higher at $106.50 a barrel, while the Brent contract rose 3% to $111.11.
Oil prices recorded a second consecutive weekly decline last week, but hit the highest levels in 14 years two weeks ago, boosted by the supply crunch from traders avoiding Russian barrels and dwindling oil stockpiles.
In economic news, German producer prices rose again in February, climbing 1.4% on the month and a massive 25.9% on the year, putting inflation firmly to the fore of investors' thinking ahead of a speech by ECB President Christine Lagarde later Monday.
Looking at the corporate sector, Volkswagen (DE:VOWG_p) could be in focus, and the German car manufacturer’s Chinese unit said on Monday it will form joint ventures with Huayou Cobalt and Tsingshan Group, in a bid to control battery costs at a time of surging raw material prices.
Additionally, gold futures fell 0.3% to $1,923.15/oz, while EUR/USD traded 0.1% lower at 1.1043.