Oil prices surged while stock markets fell on Wednesday on renewed fears over Russian energy supplies and soaring inflation. Crude futures jumped more than four percent with Brent North Sea, the international benchmark, exceeding $120 per barrel.

Russian Deputy Prime Minister Alexander Novak on Wednesday warned that a ban on Russian oil and gas imports over the Ukraine war -- which some EU countries are demanding -- would drive the world's energy markets to a "collapse". 

"It is absolutely obvious that without Russian hydrocarbons, if sanctions are introduced, there will be a collapse of the oil and gas markets," Novak told Russia's lower house State Duma as reported by Russian news agencies.

"The rise in energy prices may be unpredictable," Novak added. 

President Vladimir Putin, meanwhile, hit back at "unfriendly countries" -- which include EU members -- as he announced that Russia will now only accept rubles for gas deliveries.

Russia also warned that repairs at a terminal near a Black Sea port may take up to two months and lead to a drop in oil exports of about one million barrels per day.

Moscow could face more sanctions as US President Joe Biden left Wednesday for Europe on a mission to bolster Western unity against Russia.

Inflation and war 

On stock markets, London's benchmark FTSE 100 index was down 0.2 percent in afternoon trading as British finance minister Rishi Sunak said the UK economy would grow far slower than expected this year due to the Ukraine war and soaring global inflation.

In Frankfurt, the DAX was 1.5 percent lower while the Paris CAC 40 was shedding 1.3 percent.

Wall Street was lower in morning deals.

"The markets continue to contend with the uncertainty regarding the ongoing war in Ukraine, and persistently elevated and broad-based inflation pressures," analysts at Charles Schwab investment firm said in a note.

Sunak launched plans to ease a cost of living crisis, with UK inflation set to spike to a 40-year high on Ukraine fallout. 

"Today's data confirm a worsening squeeze on consumer incomes," said Yael Selfin, chief economist at KPMG UK.

"These price rises were dominated by increases in energy, and we expect further rises this year as global energy, food, and other commodities markets are impacted by Russia's invasion of Ukraine."

Asian stock markets closed higher after a Wall Street rally the day before.

US shares had risen Tuesday on optimism that the Federal Reserve's plan to hike interest rates would help to bring inflation under control.

While there remains plenty of concern about the war in Ukraine, analysts said some confidence had seeped back into trading floors as investors bet on consumer resilience and economies continue to reopen.

"There is a narrative taking root that the bad news is priced in," said Briefing.com analyst Patrick O'Hare.

Federal Reserve boss Jerome Powell this week said that the US central bank was prepared to act more aggressively on lifting borrowing costs should American inflation -- already at a 40-year high -- not fall quickly enough.