On Tuesday, stock markets fell as traders focused on a surging dollar, high oil costs, political deadlock in Germany, and growing concerns about a possible US debt default.

Brent crude oil momentarily surpassed $80 per barrel for the first time in in three years, owing to rising demand and fears about tight supply as the world slowly recovers from the Ebola crisis.

Wall Street finished strongly lower, with the S&P 500 down 2% and the tech-heavy Nasdaq down almost 3%, as Treasury Secretary Janet Yellen urged Congress to increase the debt ceiling promptly to protect the US government from defaulting.

“The possibility of increased energy prices, which will fuel inflation, and rising bond rates, which appear to foreshadow tighter monetary policy by central banks, have sparked broad selling across global equity markets,” said Chris Beauchamp, analyst at IG.

He stated that there were “few safe havens.”

Analysts blamed rising Treasury bond yields for the disproportionate falls in tech equities, noting that higher interest rates often hurt tech businesses due to their increased reliance on debt to fund expansion.

JJ Kinahan, Chief Market Strategist at TD Ameritrade, attributed the rise in yields to “a combination of uncertainty on Capitol Hill, coupled with the near certainty that borrowing prices will rise.”

Republicans in Washington have blocked a Democratic proposal to expand the US borrowing ceiling, and Yellen has warned that if no compromise is reached, the US will likely run out of money around October 18.

Observers believe this will precipitate a catastrophic financial disaster, but Republicans have stated that they will not fund the Democrats’ spending plans.

The looming crisis comes as Democrats struggle to pass President Joe Biden’s multibillion-dollar infrastructure and social spending bills, with party infighting stoking fears that the president’s agenda would be stymied.

In the midst of the chaos, the US government may shut down later this week if Congress does not pass a temporary budget resolution by Thursday.

Meanwhile, Germany, Europe’s largest economy, was in the spotlight as it prepared for weeks, if not months, of protracted coalition negotiations in the aftermath of weekend elections.

Chancellor Angela Merkel’s conservatives have insisted on forming a government despite losing a close election to the Social Democrats.

The DAX and CAC indexes in Germany and France were both down roughly 2%, while the FTSE 100 in London was down 0.5 percent.

In the United Kingdom, army tanker drivers have been placed on standby to provide gasoline as the country grapples with a fuel crisis.

The British pound fell more than 1% versus the dollar, reaching its lowest level since January, before recovering.

Despite high inflation, Bank of England governor Andrew Bailey signaled on Monday that the central bank will refrain from dramatic monetary policy tightening.

“The pound took a beating when governor Bailey hinted that the Bank of England will not tighten its belt forcefully, as the UK faces stagflation risks,” ThinkMarkets analyst Fawad Razaqzada told AFP.