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The run-up in oil prices since Russia invaded Ukraine has been dramatic. But analysts and traders think the recent rally could be just the beginning, as warnings of $200 crude start to trickle through the market.

What’s happening: The price of oil soared to its highest level since 2008 on Monday as Western nations weighed an embargo on crude from Russia, the world’s second largest exporter.

US crude futures jumped 6% to trade at $123 a barrel. Brent crude, the global benchmark, briefly spiked as high as $139 a barrel before easing back to $125. That’s still a leap of more than 35% in just one month.

The Biden administration has so far steered clear of direct penalties on Russia’s huge energy sector as President Vladimir Putin continues to escalate the war in Ukraine. Yet that could be changing as bipartisan pressure mounts, and as Ukraine appeals for even tougher sanctions on Moscow.

“We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil while making sure that there is still an appropriate supply of oil on world markets,” US Secretary of State Antony Blinken told CNN’s Jake Tapper on Sunday.

Breaking it down: For many in the West, there’s already a de facto ban on Russian oil. Shippers, insurance companies and banks have decided they don’t want to risk running afoul of sanctions or deal with the logistical problems of picking up Russian cargoes, and have been looking for supply elsewhere. (Shell recently bought Russian oil to fulfill orders placed before the invasion, but said it would donate the profits to help “the people of Ukraine.”)

But because a formal embargo would be more concrete, investors are spooked.

“That would make it even more likely that we would lose market supply from Russia in the short term,” Bjørnar Tonhaugen, head of oil markets at Rystad Energy, told me.

Russia exports about 4 million barrels of crude per day to the West — mostly to Europe. Some of that supply could go to China or India, but it’s not clear how much, Tonhaugen said. Russia’s total oil exports stood at about 7.8 million barrels per day in December.

Removing millions of barrels of crude from a market that was already struggling to deal with limited supply and high demand before Russia waged war in Ukraine is a recipe for further strain.

Members of the Organization of the Petroleum Exporting Countries, including Saudi Arabia and the United Arab Emirates, could step in, but they signaled last week that they don’t plan to get involved for now. Talks on a nuclear deal with Tehran that could unblock some Iranian oil exports hit a snag over the weekend.

How high can oil go? JPMorgan’s strategists said last week that if disruptions to Russian oil last “throughout the year,” prices could rise to $185 per barrel.

But Tonhaugen thinks oil prices may need to jump to $200 per barrel before demand really starts to take a hit and a rebalancing of the market begins. Bank of America has also said that oil prices could reach $200 per barrel if “most of Russia’s oil exports are cut off.”

The price of an option to buy Brent crude at $200 a barrel more than doubled on Monday, according to ICE Futures Europe data, indicating growing fear that prices could break new ground. Brent’s highest-ever price was $147.50 in July 2008.

Rapid gains in energy prices will have major ramifications for the economy, since they will cause consumers to pare back spending in other areas. The average price for a gallon of regular gas hit $4 in the United States over the weekend, also a high since 2008.

Not just oil: The prices of other commodities, including wheat, copper, aluminum and palladium, have jumped, too. The Bloomberg Commodity Index increased 13% last week, its biggest gain on record.

The bear market has arrived in Germany

German stocks officially fell into a bear market on Monday as investor concerns about the economic impact of the war in Ukraine accelerated.

The latest: The country’s benchmark DAX index plunged more than 4% in early trading. That pushed it more than 20% below its recent peak in January.

A bear market indicates extreme selling pressure as anxious investors dump shares at an elevated clip.

Remember: Germany, which receives half of its natural gas supply from Russia, is particularly exposed to the effects of the conflict.

Economists at Deutsche Bank said in a report Friday that if Russian oil and gas deliveries to Germany stop at least temporarily, inflation could jump as high as 7%, causing the country’s economy to stagnate this year.

Europe’s Stoxx 600 index fell more than 3% on Monday. It’s now roughly 17% below its January high.

“As oil and gas rockets in price and worries about the effect on global growth rise, the specter of stagflation is hovering over financial markets,” Hargreaves Lansdown analyst Susannah Streeter told clients on Monday, referring to the scenario of high inflation and low growth that was a nightmare for policymakers in the 1970s.

China braces for sharp slowdown

China has set its lowest official target for economic growth in three decades.

Speaking during one of China’s most important political gatherings of the year, Premier Li Keqiang said that China would target GDP growth of about 5.5% this year. The world’s second biggest economy grew 8.1% in 2021, but the pace of expansion slowed sharply in the final months of the year.

On the radar: Chinese policymakers face mounting challenges to keep growth steady, my CNN Business colleague Laura He reports. The country is contending with a real estate crisis and Beijing’s zero-tolerance approach to the coronavirus. The fallout from the war in Ukraine could also slow growth by driving commodity prices higher.

“A comprehensive analysis of evolving dynamics at home and abroad indicates that this year, the risks and challenges for development rise significantly, and we must keep pushing to overcome them,” Li said.

China is facing a “challenging backdrop,” said Iris Pang, chief economist for Greater China at ING.

“The country is still under a zero-Covid policy and consumption has been weak, while policy implications on the real estate and technology sectors linger on,” she said.

Up next

US consumer credit data for January arrives at 3 p.m. ET.

Coming tomorrow: Earnings from Campbell Soup (CPB), Oatly, Asana and CrowdStrike.