Stock markets fell, metals prices hit record highs and oil surged on Monday after the United States raised the prospect of an embargo on Russian crude.

European markets seesawed in afternoon trading, paring back some losses after sharp drops earlier in the day following a four percent fall in Hong Kong.

Wall Street was lower in early trading.

"The catalyst for the overnight fallout were reported that the US and Western allies are considering a ban on Russian oil imports," said Briefing.com analyst Patrick O'Hare.

US Secretary of State Antony Blinken said Sunday that the White House and allies were in talks about banning oil imports from Russia following its invasion of Ukraine.

But German Chancellor Ola Scholz on Monday cautioned against banning Russian oil and gas, saying doing so could put Europe's energy security at risk.

The benchmark Brent North Sea crude oil contract soared to a near 14-year high as it reached $139.13 before cooling to $121.54. 

The record high stands at $147.50, achieved in 2008 during the global financial crisis.

European gas prices, meanwhile, struck record peaks on energy supply fears.

Russia is one of the world's biggest crude producers and is also a leading supplier of natural gas.

"As the dust has settled, fear of European bans on Russian oil -- and potential retaliation or follow-up moves in gas or other commodities -- has subsided," said OANDA analyst Craig Erlam.

Commodities have been red hot since Russia's assault on its neighbour, with gold rising above $2,000 an ounce thanks to the metal's status as a haven investment, before falling back to $1,986.

Aluminium, copper and palladium prices kicked off the week with record highs and nickel rocketed by more than 25 percent in value.

"Commodity and energy prices have inevitably been under upward pressure, with escalating sanctions against Russia and the shuttering of some Ukrainian ports driving the search for replacement supplies of crops, metals and energy," noted Richard Hunter, head of markets at Interactive Investor.

Ukraine, one of the world's top wheat producers, has set export restrictions on the crop and other agricultural products, the Interfax Ukraine news agency reported.

The conflict has pushed wheat prices higher as Russia is the world's top exporter of cereal and Ukraine is the fourth according to US official estimates.

Stagflation worries 

The surge in prices is handing a headache to central banks, which have already begun removing pandemic-era cash stimulus and are raising interest rates to bring down inflation that stood at the highest levels in decades even before the invasion.

"The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth to prevent a stagnant environment," Hunter added.

The International Monetary Fund warned at the weekend that the war and sanctions on Russia would have a "severe impact" on the global economy.

In foreign exchange Monday, the euro sank to the lowest level for almost two years against the dollar, pummelled by fears of sanctions on Russian energy that would hit the eurozone's economic recovery, traders said.