A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Japan's Nikkei index and various countries' stock market index prices outside a brokerage in Tokyo, Japan, February 22, 2022.
A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Japan's Nikkei index and various countries' stock market index prices outside a brokerage in Tokyo, Japan, February 22, 2022. Reuters / KIM KYUNG-HOON

Global equity markets dipped while U.S. Treasury yields rose sharply on Tuesday as investors weighed the prospects of higher inflation following a phased ban of Russian oil imports by the European Union that has lifted crude prices to new highs.

EU leaders agreed in principle to cut 90% of oil imports from Russia, the bloc's toughest sanction yet on Moscow since the invasion of Ukraine in February.

The new sanctions will apply to Russian crude that is delivered by shipments and will be phased in over six months, with refined products implemented over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary.

Oil prices reached new highs on Tuesday following the EU announcement, with benchmark Brent crude rising 0.96% to $122.84 a barrel after earlier rising to $124.64 - its highest since March 9.

Brent crude contracts for August, however, settled down 1.7%, at $115.60 a barrel, after members of Organization of the Petroleum Exporting Countries (OPEC) were reported to be considering suspending a production deal with Russia.

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

"Energy is the input cost for basically everything and high oil prices are bad for inflation," said Thomas Hayes, managing member at Great Hill Capital.

The MSCI world equity index, which tracks shares in 50 countries, was down 0.61%. The pan-European STOXX 600 index fell 0.72%.

U.S. Treasury yields rose, with most maturities hitting one-week highs, as inflation concerns dominated trading after euro zone inflation climbed 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 is advocating to keep 50-basis-point rate hikes on the table until substantial reductions are seen in inflation, winding back expectations that the Fed might pause for breath after hikes in June and July.

Benchmark 10-year yields gained to 2.8622%.

On Wall Street, all three main indexes closed lower, driven by healthcare, technology, energy and industrial sectors. The Dow Jones Industrial Average fell 0.67% to 32,990.12, the S&P 500 lost 0.63% to 4,132.15 and the Nasdaq Composite dropped 0.41% to 12,081.39.

The U.S. dollar strengthened across the board on Tuesday as Treasury yields climbed and worries over a further acceleration in global inflation depressed investors' risk appetite

The dollar index, which tracks the greenback against six major currencies, was up 0.345% to 101.770. The euro was down 0.41% to $1.0733.

Safe-haven gold fell 1%, making it the second consecutive month of declines, pressured by a rise in the dollar and U.S. Treasury yields that dented the metal's appeal despite concerns over surging inflation.

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