After hitting a 14-year high yesterday, oil prices stayed above $120 a barrel on Tuesday, with Russia threatening to halt natural gas supplies to Europe via the Nord Stream 1 pipeline if the US and its EU allies ban its crude imports in reaction to its military offensive in Ukraine.

Such a move would further sway energy markets and intensify global price pressures.

After Berlin opted to halt the inauguration of the new Nord Stream 2 pipeline, Russian Deputy Prime Minister Alexander Novak, who is also in charge of energy matters, stated in a televised speech on Monday that Russia might halt the flow of gas through pipelines from the country to Germany.

“We understand that, in light of the unfounded accusations leveled against Russia in connection with the European energy crisis and the imposition of a ban on Nord Stream 2, we have every right to take a mirror decision and impose an embargo on gas pumping through the Nord Stream 1 gas pipeline,” said Mr Novak, who was previously Russia’s energy minister.

“We haven’t made this decision yet.” This will be of no use to anyone. Despite the fact that European politicians are pressuring us to do so with remarks and allegations against Russia,” he said.

Mr Novak added that a ban on Russian petroleum, which the US declared on Monday and which sent oil prices to their highest level since 2008 at the start of trading this week, “would have devastating effects for the global market.”

He predicted that oil prices could rise to $300 a barrel or higher.

The US move is part of a larger plot to keep the world’s second-largest energy exporter out of global markets and economically isolate Russia in preparation for its military campaign in Ukraine.

Russia provides over 40% of Europe’s gas, while its crude amounts for about 3% of US oil imports, or about 200,000 barrels per day.

“The West’s financial sanctions on Russia have so far failed to de-escalate the war in Ukraine,” said Louise Dickson, senior oil market analyst at Rystad Energy.

“Expanding sanctions to cover physical commodities, such as Russian oil shipments, is a possibility.” A unilateral US prohibition would have a negligible impact.”

In early trade on Monday, oil prices rose above $130 a barrel as the US indicated it was considering blocking Russian crude imports and was in talks with European allies about it.

Brent, the worldwide benchmark for two-thirds of the world’s oil, hit $139.13 a barrel in early trade Monday, while West Texas Intermediate, the benchmark for US crude, soared to $130.50.

Brent was up 3.6 percent at $127.6 per barrel at 10.25 a.m. UAE time on Tuesday morning, while WTI was up 2.82 percent at $122.8.

“If the US can persuade Europe to join the embargo, the continent will be blocking around 3.8 million bpd of Russian oil imports on a monthly basis.” Given its members’ reliance on Russian energy, the EU is unlikely to agree to an outright ban, according to Ms Dickson.

“The fact is that 7.5 million bpd of Russian exports, or even a portion of them, cannot be replaced in an already tight worldwide market,” said Jeffrey Halley, a senior market analyst at Oanda.

The rise in oil prices to their highest level in 14 years on Monday has exacerbated global inflationary pressures, and the IMF has warned that the Russia-Ukraine conflict might have a “severe impact” on the global economy.

The UN food price index rose 4% in February compared to January this year, and was up 24% from the same month a year ago, setting a new high.

Gold, a classic safe haven and inflation hedge, rose to $2,004 an ounce on Tuesday at 10.33 a.m. UAE time on the Chicago Board of Trade.

“The major concern for investors seems to be rising inflation, while the forecast for growth is deteriorating by the day,” said Naeem Aslam, chief market analyst at Avatrade. “This development is lowering investor confidence and has a negative impact on all sectors. This is why, even when company stock prices fall, stock dealers appear to have lost interest in buying the drop.”

At the close of trade on Monday, the S&P 500 was down around 3%, the Nasdaq was down 3.62 percent, and the Dow Jones Industrial Average was down 2.37 percent.

At 10.12 a.m. UAE time on Tuesday, the Nikkei 225 index of Japan was down roughly 2%.