Portugal Colonial - Oil extends rally on Russia embargo talk, stocks rise

Both main crude contracts started the week by soaring more than seven percent Monday as EU nations discussed following Washington and putting an embargo on Russian energy imports for its war in Ukraine.

Some members are pushing to ramp up pressure on Vladimir Putin with more sanctions over his invasion, though others including Germany -- which still relies on Moscow's fuel -- have been reluctant to target the key sectors.

Adding to upward pressure on oil was a warning from Saudi Arabia that Yemeni rebel attacks on its oil facilities pose a "direct threat" to global supplies, after Red Sea facilities belonging to oil giant Saudi Aramco were targeted.

The surge in oil prices has been a key driver of turmoil on world markets in recent weeks as demand surges owing to economic reopenings just as supplies are strained.

That, along with a spike in the cost of other key commodities such as metals and wheat caused by the war, has sent inflation rocketing and caused a headache for central banks already trying to wind down pandemic-era monetary policy.

"It seems energy traders are growing more confident that supply shortages are just around the corner," warned OANDA's Edward Moya.

"China's decision to avoid broad lockdowns is also helping oil prices as the short-term crude demand hit should be temporary. The oil rollercoaster ride remains a geopolitical trade and right now it seems the risks are growing and that could push crude prices higher."

There is a growing fear that the global economy could endure a period of stagflation in which prices soar by growth stalls.

And the Fed chair Jerome Powell on Monday indicated the bank could hike rates at a faster rate to keep a leash on inflation, less than a week after it announced what is expected to be a number of increases this year.

"I sense that the Fed might well deliver 50 basis point hikes in both May and June as policymakers recognise it will be tough to get inflation down without higher unemployment," said SPI Asset Management's Stephen Innes.

"So as long as multiple 50 point hikes remain on the... agenda, stock markets could remain nervous."

And Moya added that traders were recognising that rates were likely to shoot up quicker than they had expected, which "could eventually lead to a taper tantrum which might happen alongside stagflation".

"Monetary policy is still accommodative for now, but that could quickly change if the Fed delivers a couple supersized rate hikes by the summer."

Still, while Wall Street ended on a negative, equities remained resilient in Asia.

Hong Kong was back on the rise after last week's blockbuster surge as Chinese authorities reiterated a pledge to support markets and the stuttering economy.

Tokyo returned from a long weekend to pile on more than one percent, helped by a drop in the yen to a new six-year low against the dollar, which helps exporters.

Shanghai, Sydney, Seoul, Manila, Jakarta and Wellington also rose, though Singapore and Taipei struggled.

China Eastern Airlines sank six percent in Shanghai and four percent in Hong Kong after one of its jets crashed in China carrying 132 people, having dropped more than 20,000 feet in just over a minute.

- Key figures around 0230 GMT -

Brent North Sea crude: UP 2.8 percent at $118.84 per barrel

West Texas Intermediate: UP 2.4 percent at $114.81 per barrel

Tokyo - Nikkei 225: UP 1.6 percent at 27,242.88 (break)

Hong Kong - Hang Seng Index: UP 0.8 percent at 21,390.52

Shanghai - Composite: UP 0.1 percent at 3,256.03

Euro/dollar: DOWN at $1.0994 from $1.1013 Monday

Pound/dollar: DOWN at $1.3144 from $1.3156

Euro/pound: DOWN at 83.65 pence from 83.67 pence

Dollar/yen: UP at 119.88 yen from 119.47 yen

New York - DOW: DOWN 0.6 percent at 34,552.99 (close)

London - FTSE 100: UP 0.5 percent at 7,442.39 (close)

F.Santana--PC