Russia-Ukraine Tensions: Implications For Russia And Global Markets

Recent escalations in the Russo-Ukrainian War, a conflict that has been ongoing since February 2014,[1] have come to dominate headlines and consume the attention of world markets.

Feb 27, 2022|Market Insights- 3 min

The impact of the standoff between the two nations is already felt in higher gas prices[2], and may extend to the world economy if the conflict escalates.

In this article, we review some of the key data so far.

Russian markets

The prospect of a sustained armed conflict has already raised the prospect of more severe economic sanctions from the US and other major trading partners[3]. These will impact the Russian economy first and foremost, and markets are already pricing this in.

Stocks: Decline in the MOEX

On February 21st, Russia’s benchmark index (MOEX) dropped 11%, as roughly three-quarters of the companies listed fell to 52-week lows (see chart below).

Source: Bloomberg

This is the biggest fall in the MOEX since the global financial crisis in 2008 that was driven by falling oil prices and fears concerning the Russian-Georgian war[4].

Impact on the Ruble

Aside from the equity markets, the geopolitical tension surrounding the prospect of a Ukrainian conflict is placing pressure on the Russian Ruble.

The Russian ruble has weakened markedly since the beginning of the crisis. The recognition by Putin[5] of two separatist-controlled states in Eastern Ukraine on February 22 brought the ruble to US dollar rate near its previous record of 82.4 in 2016, before rising another 10% to 87.8 on February 24 following the announcement of the beginning of Russian military operations in Ukraine[6].

Source: Bloomberg 

Global markets

The effects of the conflict on the global economy begins with global energy markets.

Gas prices

Germany has already frozen developments of the new Nord Stream 2[7] gas pipeline project in response to the actions taken by Russia. Furthermore, the knock-on effect of sanctions from the U.S. and Europe could significantly reduce oil and gas trading between Russia and European Union (EU), if not halt it altogether[8].

Russia is Europe’s largest energy source, supplying roughly 27% of its oil[9] and 35% of its natural gas[10]. Awareness of the European gas reaching record prices in December (see chart below) given the EU’s reliance on Russia for energy.

Source: Refinitiv Datastream/Karin Strohecker

Wider economic repercussions

A possible rise in oil prices to $150 per barrel[11] risks reducing global GDP growth to 0.9% in the first half of the year, while increasing inflation to 7.2%[12].

This would affect the profitability of publicly listed firms across the world, especially European firms that own stakes in Russian energy companies[13].

European banks that face the highest risk[14]. French and Austrian banks have the largest loan exposure to Russia ($24.2 billion and $17.2 billion, respectively), followed by U.S. lenders at $16 billion, and Japanese and German banks at $16 billion and $8.8 billion, respectively.

Source: Refinitiv Datastream/Karin Strohecker


The fundamentally unpredictable situation in the short term makes speculative trading riskier than usual, especially with the number of countries involved in the nearly decade-long history of the conflict.

Until the scale of the conflict and the reaction of world powers is better known, the long-term effects are also hard to predict. The wisest strategy would be to avoid predicting the short-term and focus instead on long-term investing, risk diversification and asset allocation.




[1] -
[2] USA Today -
[3] The Guardian -
[4] The Telegraph -
[5] New York Times -
[6] Time -
[7] Reuters -
[8] NBC -
[9] Bloomberg -
[10] Reuters -
[11] Business Insider -
[12] Reuters -
[13] Reuters -
[14] Reuters -

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