Oil surges past $100 a barrel after Russia invades Ukraine Oil temporarily surged past triple-digit prices for the first time since 2014. The breach of the psychologically significant milestone is bound to reinforce fears about inflation.

Oil surges past $100 a barrel after Russia invades Ukraine, but later pares gains

A sign shows gas prices at a Shell station in San Francisco on Feb. 23. Gas prices could rise further as crude prices surge following Russia's invasion of Ukraine. Justin Sullivan/Getty Images hide caption

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Justin Sullivan/Getty Images

A sign shows gas prices at a Shell station in San Francisco on Feb. 23. Gas prices could rise further as crude prices surge following Russia's invasion of Ukraine.

Justin Sullivan/Getty Images

Global oil prices temporarily rose to above $100 a barrel on Thursday after Russia launched an invasion of Ukraine, hitting triple digits for the first time since 2014.

But oil prices pared gains after the U.S. stated that sanctions against Russia would not directly target oil and gas, and confirmed plans to release oil from strategic reserves to stabilize supplies.

Markets will likely remain volatile for a while as the war in Ukraine unfolds. Energy prices were already relatively high before this crisis, as production has not kept pace with surging demand from a global economy that is recovering from the pandemic.

Russia's missile strikes on cities across Ukraine, including the capital of Kyiv, raised those prices even further, reinforcing fears about inflation. Brent crude — the global benchmark for oil prices — went as high as $105.79 for the front-month contract before paring gains later in the day,

Natural gas prices also climbed; in Europe, natural gas prices were up by 60% at one point on Thursday, before settling down at 30% over Wednesday's price.

A lot of uncertainty remains

Russia is one of the world's top producers and exporters of crude oil and natural gas. Investors fear that some exports could be disrupted by conflict on the ground, while others could still be blocked by sanctions, or shut down by Russia as a strategic move against Europe.

So far the U.S. has avoided directly targeting Russia's energy exports, which would send global energy prices even higher.

In a speech on Thursday, President Biden announced a slew of new sanctions against Moscow, including export controls on semiconductors so they could not be sold to Russia. The White House also announced that Russia's two largest banks would be blocked from processing payments through the U.S. financial system.

But those sanctions were "specifically designed to allow energy payments to continue," Biden said.

Oil exports could still be affected indirectly, but it means the U.S. is stopping short of the sanctions that would be most damaging — both to Russia and to energy consumers.

Additionally, the Biden confirmed the U.S. is "actively working" on another release from the Strategic Petroleum Reserve, coordinating with other countries that could take similar actions.

The release is designed to increase the amount of oil available on global markets and moderate prices. Biden organized such a release in November, which did not have a dramatic impact on prices.

Ukrainian troops patrol at the frontline outside the town of Novoluhanske, in eastern Ukraine, on Feb. 19. Aris Messinis/AFP via Getty Images hide caption

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Aris Messinis/AFP via Getty Images

Ukrainian troops patrol at the frontline outside the town of Novoluhanske, in eastern Ukraine, on Feb. 19.

Aris Messinis/AFP via Getty Images

Surging oil prices come at a time of high inflation

A surge in crude prices is likely to lead to higher gasoline prices – just as the U.S. is suffering its highest inflation level in four decades.

Rising gasoline prices would contribute to higher inflation in the short term, hurting the pocketbooks of many people. Rising transportation and production costs could also make goods more expensive.

There are other impacts. A sharp climb in the price of crude will benefit oil producers, while creating complex repercussions for international relations and the fight against climate change.

This was the first time crude prices have gone above $100 since 2014.

Brent crude hit an all-time peak in July 2008, passing $147 a barrel before crashing later that year. Between 2011 and 2014, prices were sustained above $100 for prolonged periods of time.

Oil markets are closely watching for any major shifts that could push prices back down — including a remarkable de-escalation of tensions in Ukraine or a new coronavirus variant that could push down global demand.

But the most likely source of near-term price relief would be any news of a new nuclear deal with Iran, a major oil producer currently under U.S. sanctions.

Clinching a deal would potential bring significant quantities of crude oil into global markets, reducing concerns about supply.