Financial Markets Reaction to Ukrainian War

We are all watching the news and concerned about the war in Ukraine and the dramatic human suffering. This war will have large direct and indirect impacts that will be felt globally, particularly in financial markets and international trade.

This is the first in a series on this war, and its short and longer term potential impacts on the financial markets and global trading products and partners.


  • Russia is the world’s 2nd largest crude producer and provides about 35% of Europe’s and 50% of Germany’s natural gas supply.
  • Crude oil prices over $100/barrel for the first time since 2014.
  • UK and Dutch gas priced rose 40-50% last week.
  • Top buyers of Russian oil are struggling to secure guarantees at Western banks or find ships to take crude from Russia.
  • At the time of this writing, the US and Europe are still debating cutting their ties with Russian oil, which Russia would feel quickly. Based on current polls, popular support is sending the message that people are willing to pay more at the pump to cut Russian ties in support of Ukraine.
  • Both oil and gas markets remain unstable.


  • Surge in inflation linked bond sales.
  • Yields of rate sensitive Treasury Inflation Protected Securities (TIPS) slipped last week.
  • Central banks may have to go slower than forecasted with interest rate increases to battle inflation as economic growth also takes a hit.


  • Last Thursday wiped out about $1T off the value of the global stock market and accelerated a drop in major indexes.
  • Tech-heavy Nasdaq had a period of recorded 20% fall from the last peak, but ended up closing the day higher, avoiding bear market labeling.
  • Europe’s STOXX600 has bounced up and down by 10% +/-.
  • MSCI’s 24 country emerging markets index (MSCIEF) did earn its bear market label, at its 4.3% drop last Thursday left it down over 20% from its record high set almost exactly one year ago.


  • Last Thursday Moscow’s MOEX exchange dropped 33% as traders braced for stiff sanctions. MSCI’s Russia index was down 38%. Analysts estimate it was one of the top three stock market crashes of all time.


  • Ukraine’s currency and bonds also crashed violently, with investors wondering if they can avoid a sovereign default.
  • Wheat prices hit their highest prices since mid-2008 as grain and oilseed exports are disrupted.
  • Ukraine’s military suspended commercial shipping at all its ports last Thursday. With Russia now looking like it is moving to capture Odessa, the fight over supply chain control on the Black Sea will put further pressure on prices and drive up food inflation even further than it has been following Covid.

What Should we Expect This Week?
Rate hike fears have been somewhat replaced, for now, by the war muddying the markets. Many crystal balls are cloudy right now, and the Magic 8 ball says, “Outlook Hazy, Try Again Later”.

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