The price of oil soared as the threat of war in Europe mounted on Monday night, with Putin recognizing parts of Ukraine as independent states and the UK preparing sanctions.
The price of Brent crude reached a seven-year high of £71.91 a barrel on Tuesday. Russia is the world’s second largest oil exporter after Saudi Arabia and is the world’s top producer of natural gas.
Maike Currie, an investment director at Fidelity International, told the BBC: “Russia accounts for one in every 10 barrels of oil consumed globally, so it is a major player when it comes to the price of oil, and of course, it’s really going to hurt consumers at the petrol pumps.”
Sanctions on Russia will increase the prices of oil and gas – meaning home energy bills will increase even further as well as the cost of filling up your car.
Ad the cost of everything we could import increase thanks to an increase in the price of shipping freight.
Song Seng Wun, an economist at CIMB Private Banking, told the BBC: “There are fears that freight and shipping costs, that are already at elevated levels, will climb higher because of demand-supply disruptions.”
Motorists have already this week been hit by fuel prices reaching record highs.
The average price of a liter of petrol and diesel at UK forecourts on Sunday was 149p and 153p respectively, according to RAC figures.
This means the cost of filling up a typical 55-litre family petrol car is £82, while diesel models cost £84.
RAC fuel spokesman Simon Williams described the prices as “another unfortunate landmark”.
He said: “The unrelenting rising price of fuel is hurting households up and down the country, furthering the cost-of-living crisis.
“Businesses are also suffering with diesel reaching new heights.”
Prices have soared on the back of rises in wholesale fuel costs, which have jumped amid a resurgence in demand following the reopening of global economies.
Mr Williams went on: “While the price of oil is still close to 100 US dollars a barrel wholesale fuel prices don’t merit further retailer rises across the board at the pumps.
“We realize that smaller retailers who don’t buy fuel as frequently will be hit by higher wholesale costs, but the biggest retailers who buy all the time shouldn’t currently be increasing their forecourt prices.
“We urge them to play fair with drivers at this difficult time.
“Tension between Russia and Ukraine is still weighing heavy on the oil price but there is now a glimmer of hope that more oil may come on to the market from Iran due to a possible nuclear agreement with the US to end sanctions.”
Traders tried to decide how best to respond to rising tensions between Russia and Ukraine, with swings and uncertainty remaining strong.
The safe-haven of gold hit a six-month high, with an ounce costing 1,900 dollars (£1,396). One suggestion has been that any sanctions against Russia could include a ban on Russian businesses using US dollars.
But the FTSE 100 leading index managed to ride out the wave intact, closing down 29.29 points, or 0.39%, at 7484.33.
By comparison, France’s Cac 40 lost 2% and Germany’s Dax 30 fell by 2.1%.
Sterling barely moved and a pound was worth 1,135 euros and 1,361 dollars as markets closed.
Danni Hewson, AJ Bell financial analyst, said: “Brent crude has hopped back up to over 95 dollars a barrel amidst concern about Russian plans after it said talks of a summit were premature.
“The stage is set for another volatile week as investors consider which stocks might be impacted if Russia does ratchet up the tension by sending troops into regions held by Russian backed separatists.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Worries are mounting that wide ranging sanctions would pummel the businesses and these concerns aren’t likely to ease, with the Kremlin saying there are no concrete plans for a summit yet in place.”