Commodities soared on Monday as worries about Russia's military intervention in Ukraine's Crimean peninsula grew. Brent crude oil rose more than $2.00 on Monday and traded at $111.12 at 5:35 GMT on Tuesday morning as investors continued to watch the region for further developments.
Following Russian President Vladimir Putin's announcement that he had the right to use military force to intervene in Ukraine in order to protect Russian interests, Ukrainian officials reported that armored vehicles were gathering on the Crimean peninsula. In response to the news, investors pulled out of equity markets and poured their cash into commodities like oil in case of an interruption.
The US and its European allies vowed to punish Russia economically if Putin did not abandon his military initiatives. CNBC reported that the threat of trade restrictions designed to isolate Russia and damage its economy caused investors to look to crude as a sound investment. Since most major European nations depend heavily on Russia for natural gas supplies, many believe a disruption would lead to heavier reliance on alternative fuels.
However, positive US data helped the dollar rise which in turn capped Brent's gains. PMI data indicated that US factory activity improved in February and separate reports showed that consumer spending increased more than predicted on January. The data supported WTI prices as it indicated that the world's number one oil consuming nation's economy was back on track after severe winter weather depressed several economic indicators.
Moving forward investors will remain focused on the situation between Russia and Ukraine for further information as to whether or Russia plans to step up its military presence. Russian relations with the US, which have long been strained, continue to deteriorate as calls for a pullback fall on deaf ears.