By Herbert Lash and Marc Jones
NEW YORK/LONDON (Reuters) -Oil shot back above $100 a barrel and U.S. and German government debt rallied on Tuesday as fears increased over the impact of aggressive sanctions against Russia after its invasion of Ukraine, further depressing stocks in Europe and on Wall Street.
Russia's equity markets remained suspended and some bond trading platforms were no longer showing prices, but dealing in the world's major financial centers was orderly, albeit jittery.
The main stock indices in Germany, France, Italy and Spain closed down more than 3% while the pan-European STOXX 600 index fell 2.4%.
The Dow, S&P 500 and Nasdaq equity indexes all closed around 1.5% lower while U.S. and European banking indices were hit hard for a second day, falling about 5.6% each.
MSCI's all-country world index fell 1.35%.
Yields on 10-year German bunds slid back into negative territory for the first time since late January and U.S. Treasuries dropped to five-week lows as prices, which move inversely to a bond's yield, rallied on safe-haven buying.
On the sixth day of Russia's invasion of Ukraine, the disruption caused by sanctions have raised questions about the toll of the crisis on global growth and inflation.
"If Russia controls more of Ukraine's food and energy production capacity and those types of things, they may end up being more expensive for everyone around the world," said Tom Simons, a money market economist at Jefferies in New York. "The economic consequences of it may be more long-lasting."
The upending of Russian trade may spur an increase in the pace of inflation in the short-term for many European jurisdictions, Citi researchers said in a note.
Investors are acting rationally from a market standpoint, driving up oil, gas and commodity prices because they understand there could be supply chain disruptions, said Anthony Saglimbene, global markets strategist at Ameriprise Financial.
"Moving forward, though, there's all these second- and third-derivative impacts that the market is still trying to figure out," Saglimbene added. "When you cut Russia out of the global financial system, what are the ramifications for not only Russia, but stability across Europe right now?"
Russia said it was placing temporary curbs on foreigners seeking to exit Russian assets, braking an accelerating investor exodus driven by crippling Western sanctions.
RUSSIA ASSETS PLUMMET
Russian assets went into freefall with London-listed iShares MSCI Russia ETF plunging 33% to a fresh record low and shares of Sberbank, Russia's biggest lender, falling to 21 cents on the dollar from just under $9 before the invasion.