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Ukraine war fears shake stocks and send oil soaring | Business section

LONDON (Reuters) — Global stock markets recouped their losses on Tuesday as investors remained hopeful that the deployment of Russian troops to two breakaway regions in eastern Ukraine will go as far as Moscow.

The specter of war on Europe’s eastern flank flared Monday, sending oil prices to their highest level in seven years, after Russian President Vladimir Putin ordered the dispatch of troops to the Ukrainian regions of Donetsk and Luhansk.

The United States and its European allies have begun announcing tough new sanctions in response, with German Chancellor Olaf Scholz warning that the Nord Stream 2 gas pipeline will now be denied certification to start operating.

Europe’s STOXX 600 index fell nearly 2% to a seven-month low in early trading. But the mood turned more positive and the index was back around Monday’s closing level after reports that Russia would recognize the current borders of breakaway regions.

The rouble, which has been hammered by rising tensions in recent weeks, spiked higher in currency markets while German stocks – seen as more vulnerable due to the country’s heavy reliance on Russian gas – also rallied. erased losses of more than 2% to trade flat.

Wall Street also erased losses, with the S&P 500 futures gauges turning positive and the Nasdaq recovering from losses of about 2% to trade down 0.4%.

“We are unclear, but this sets the stage for de-escalation,” Trium Capital fund manager Peter Kisler said, referring to news about recognition of the Ukrainian border.

Ukraine’s military said earlier that two soldiers had been killed and 12 injured in shelling by pro-Russian separatists in the east over the past 24 hours.

The prospect of a major European war had prompted investors to dump stocks and other riskier assets as Brent crude surged more than $3 to hit $99 at one point, its all-time high. since September 2014, reflecting fears that Russia’s energy exports could be disrupted by any conflict.

The benchmark public debt was also sought. Yields on German government bonds hit their lowest level since Feb. 4, while US Treasuries rallied.

“Europe is in a very, very uncomfortable situation,” said Michael Hewson of CMC Markets. “What you get is classic risky play here.”

The MSCI World Equity Index, which tracks stocks from 50 countries, fell to its lowest since January 28 before paring losses to 0.1%.

MSCI’s broadest index of Asia-Pacific stocks outside Japan previously fell 1.5%.

Spot gold, meanwhile, turned negative after climbing more than 0.4% to a six-month high near $1,913.

Metals Shine, Ruble Recovers

Washington and European capitals condemned Russia’s entry into Ukraine’s breakaway regions, promising new sanctions, while Ukraine’s foreign minister said he had been assured of a “resolute and united” response from the European Union.

German Chancellor Olaf Scholz has put the certification of the Nord Stream 2 gas pipeline between Russia and Germany on ice, a move widely seen as the toughest step Europe is likely to take against Moscow at this stage.

Britain imposed sanctions on five Russian banks and three high net worth individuals in what Prime Minister Boris Johnson called a “first tranche, first barrage” of sanctions.

Fears of a supply disruption from Russia propelled London-traded aluminum to a more than 13-year high of $3,350 a tonne, while benchmark nickel hit its all-time high since August 2011. Nickel traded in Shanghai hit an all-time high.

The Russian ruble slid to a 15-month low at the start of Asian trading, dropping below 80 against the dollar before turning around and climbing again.

The ruble lost 12% on the prospect of an invasion of Ukraine, with Russian stocks down a third.