Oil prices slumped to the lowest levels seen in four years while US stocks plunged, leading to a 15-minute halt in trading on the New York Stock Exchange after Washington announced a ban on all air travel from Europe. The ban exempts the UK as the US looks to contain the spread of the coronavirus, which was declared a pandemic by the World Health Organisation on Wednesday.
Brent, the most widely-traded benchmark was down 7.29 per cent to $33.18 per barrel, while West Texas Intermediate was lower by 7.31 per cent to $30.57 per barrel at 5.40pm UAE time.
Markets globally continued the slide into bearish territory at the opening of trading following European stocks, which plunged 8 per cent. The S&P 500 fell 6.7 per cent at the opening, while the Nasdaq Composite Index slid 6.61 per cent. The Dow Jones Industrial Average also plunged 6.54 per cent. Market circuit breakers kicked in halting trading as stocks continued to plunge. The circuit breakers, which kick in when indices fall below 7 per cent were also triggered earlier this week following a sell-off from the spread of the coronavirus and collapse of the Opec+ deal.
Asian markets continued the slide on Thursday morning with the Hong Kong's Hang Seng down 3.6 per cent, Japan's Nikkei falling 4.33 per cent and the Shanghai composite dropping 1.90 per cent. In the Middle East the Dubai Financial Market dropped 8.34 per cent at 10:07am while Abu Dhabi Securities Exchange fell 6.15 per cent. Australia's stock market closed down 7.36 per cent.
The downturn in markets followed US President Donald Trump's announcement that he would suspend all travel from Europe to the US for the next 30 days. The restrictions do not apply to the UK or to US nationals.
Mr Trump also clarified in a tweet that the movement restrictions apply only to people and will not affect trade.
"Trump’s suspension of EU flights to and from the US will contribute to the demand shock caused by the Covid-19 outbreak and will have a further downward impact on the global oil demand in the next 30 days," said Sara Vakhshouri of SVB Energy.
Though she reiterated Mr Trump's observation that the present crisis is not financial in nature, Ipek Ozkardeskaya a senior analyst at Swissquote Bank said the situation "is on the verge of becoming one of the severest economic meltdowns we have experienced over the past decades and unfortunately, the arms we have in disposition to combat a regular financial crisis doesn’t seem to work in this particular situation."
She added, "this is because proposed financial measures aim [at] boosting activity at a time companies slow down operations to prevent further contagion. In this sense, we are not sure that companies could or would benefit fully from the massive monetary measures deployed by central banks in panic."
The US Federal Reserve cut interest rates by 50 basis points last week, while the Bank of England followed suit on Wednesday and European countries are shifting gears and looking at rolling out stimulus packages.
"Cheap lending is clearly not the answer to the specific problem we are facing today. Massive rate cuts have the effect of a sword cutting through the water," added Ms Ozkardeskaya. "It appears that pulling out the heavy artillery doesn’t do much, other than narrowing central banks’ capacity to deal with the crisis when the time is right. This is why fiscal packages make more sense to contain panic in the short term, but actions on that end remain weak to satisfy investors."
Oil had gained 10 per cent of its value on Tuesday after the US administration promised payroll tax cuts. The rebound followed prices plunging a record 30 per cent - the worst in 28 years - at the start of trading this week after the Opec+ alliance failed to agree on further production cuts to counter a slowdown in demand from the spread of the coronavirus.
Prices sank again after Saudi Arabia and the UAE said they would bring 12.3 million bpd and 4m bpd to the markets in April. The Gulf producers also said they would be raising their production capacities to 13m bpd and 5m bpd, without specifying when they're likely to reach their targets.
Opec, meanwhile revised down its oil demand growth forecast for 2020 to 60,000 barrels per day, as it factored in the impact on economic growth from the continued spread of the coronavirus outbreak.
The group joined the International Energy Agency in revising expectations for demand growth. Earlier this week, the Paris-based organisation said global oil demand is set to contract in 2020 - the first full-year decline in more than a decade.
"The US, like many other countries, is unable to provide the right action in response to the virus spread," said Hussein Sayed, Chief Market Strategist at FXTM. Mr Trump, he added "simply couldn’t come up with strong stimulus measures to ease fears of businesses and consumers. A much-needed payroll tax cut doesn’t seem to be on the cards in the short term, and measures to isolate the US from Europe is only making the situation worse. A global recession seems impossible to escape and a massive decline in corporate earnings is inevitable."