NEW YORK (Reuters) – Global stock markets fell while U.S. Treasury yields rose sharply on Tuesday as investors weighed the prospects for higher inflation following the gradual ban on Russian oil imports by the European Union that pushed crude prices to new record highs.

European Union leaders agreed in principle to cut 90% of oil imports from Russia, the bloc’s toughest sanctions yet on Moscow since the invasion of Ukraine in February. Read more

The new sanctions will apply to Russian crude delivered by shipment and be implemented in phases over six months, with refined products being implemented over eight months. The embargo excludes pipeline oil from Russia as a concession to Hungary.

Oil prices hit new highs on Tuesday after the European Union announcement, with benchmark Brent crude rising 0.96% to $122.84 a barrel after earlier rising to $124.64 – the highest level since March 9.

But Brent crude contracts for August closed down 1.7%, at $115.60 a barrel, after news emerged that members of the Organization of the Petroleum Exporting Countries (OPEC) were considering suspending a production deal with Russia.

US West Texas Intermediate (WTI) crude was also down 0.06% at $115.02 a barrel, reversing earlier trading gains.

“Energy is the input cost of basically everything and higher oil prices hurt inflation,” said Thomas Hayes, managing director at Great Hill Capital.

MSCI World Stock Index (.MIWD00000PUS), which measures stocks in 50 countries, fell 0.61%. The pan-European Stoxx 600 index fell 0.72 percent.

US Treasury yields soared, with most maturities at a one-week high, as inflation fears dominated trading after eurozone inflation surged to a record high this month.

Treasury yields also rose, driven in part by hawkish comments from Federal Reserve Governor Christopher Waller on Monday. Waller said he’s calling for a 50 basis point rate hike to be kept on the table until deep cuts in inflation are seen, removing expectations that the Fed might take a breather after the hikes in June and July. Read more

The benchmark 10-year bond yield rose to 2.8622%.

On Wall Street, all three indices closed lower, led by the health care, technology, energy and industry sectors. Dow Jones Industrial Average (.DJI) The S&P 500 fell 0.67% to 3,2990.12 (.SPX) It lost 0.63% to 4132.15 and the Nasdaq Composite Index (nineteenth) It fell 0.41% to 12081.39.

The US dollar strengthened across the board on Tuesday as Treasury yields rose and concerns about another acceleration in global inflation dampened investors’ appetite for risk Read more

The dollar index, which measures the greenback against six major currencies, rose 0.345% to 101.770. The euro fell 0.41% to $1.0733.

Safe-haven gold fell 1%, making it the second consecutive month of decline, as rising dollar and US Treasury yields dampened the metal’s allure despite fears of rising inflation.

Spot gold fell 1.0% to $1,837.30 an ounce. US gold futures fell 0.99% to $1,833.00 an ounce.

(Covering) By Chipwick Ogo in New York Editing by Nick Ziminsky and Will Dunham

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