Global shares pulled off their multimonth lows on Tuesday, but trade was volatile as soaring commodity prices threatened to overwhelm already-fragile economic growth.
A ban on Russia's oil exports is one of the possible sanctions against the country. On Monday, concerns about this catapulted the price of crude to within a few dollars of the 2008 record highs.
The nickel rally has tripled in just three days to new record highs.
The S&P 500 and the Dow Jones fell by almost 1% earlier in the day, but stock futures trimmed overnight losses. In Asia trading, those on the Nasdaq 100 shed over 1.0%.
Russia threatened to cut natural gas supplies to Europe in response to the potential oil embargo, and warned oil could hit $300 a barrel if restrictions on its 7 million barrels per day of exports come into force.
The price of oil rose to as much as $139.13 a barrel on Monday, the highest level since July 2008, but was last up 1.7% at $125.15 a barrel. The price of crude was up 1.4% at $121.17 a barrel.
The world's economies were already facing rising price pressures, and central banks had to quickly switch into interest rate-hike mode to ward off a more damaging spike in inflation. The energy-driven price shocks of the 1970s and the recessions that followed have been compared with the recent surge in commodity prices.
This price jump, along with that seen in other commodities, is raising concerns about price pressures, but also about the stiff headwinds that it will pose to economic growth, as input prices surge causing companies to reduce production.
As a result, the word "stagflation" seems to be getting thrown around more and more, with echoes of the 70's growing louder.
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On the London Metal Exchange, nickel prices rose to a new record high above $100,000 a ton before falling back to around $82,000. There are investors looking for alternative supplies to Russian exports. Russia is the third-largest producer of the metal behind Indonesia and the Philippines.
It is fair to say that if commodities stay at these elevated levels, it will make life even more difficult for central banks, who will have to try and thread the needle between preventing inflation and higher interest rates.
In Europe, trading was unpredictable. The Stoxx 600 fell 0.6% in early trade, before bouncing back for a gain of 1.4%, while the DAX initially fell 1%, before paring losses and rising 2%.
Asian stock markets were under pressure. China's benchmark indices fell between 2% and 2.6%.
The dollar gained against trade-sensitive emerging currencies like the Brazilian real and the Mexican peso.
ING strategists Chris Turner and Francesco Pesole said in a daily note that the dollar has continued to strengthen as global liquidity conditions deteriorated.
The focus now is on the magnitude of the projected shock to oil and gas supply from Russia, either from Russia itself or from self-imposed curbs by Western countries.
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