Soaring Oil Prices Test Resiliency of U.S. Stocks

Soaring Oil Prices Test Resiliency of U.S. Stocks

Western firms appear well insulated against the impact of the sanctions imposed this week on Russia. Whether global markets will fare as well isn’t yet clear.

Major U.S. stock indexes have been relatively resilient, with the S&P 500 and Nasdaq Composite both up at least 1.9% since Russia invaded Ukraine. Investors so far have been calm in the face of the conflict and many have used the opportunity offered by lower prices to buy. Data suggest that risks facing U.S. banks with exposure to the region are limited.



The good news, from the perspective of U.S. finance: The average stock portfolio is hardly exposed to Russian stocks, and U.S. companies have little reliance on Russian revenue. Western banks’ exposure to Russia, meanwhile, has dwindled since the 2014 annexation of Crimea.



The uncertain and potentially worrisome news: Global energy markets may be more exposed to the impact of sanctions than traders, portfolio managers and policy makers realized. Oil surged Tuesday to its highest level in more than seven years, reflecting in large part the pullback by Western traders from a range of firms they feared might be linked in any way to sanctions. A corresponding plunge in bond yields and bank shares