Influence of Potential Ukraine Russia War on the Stock Market

The conflict between Russia and Ukraine is not easing. Instead, it is escalating. As a result, the stock markets, energy prices, and gold prices might be impacted. Read on to know more about the influence of the potential Ukraine-Russia war on the stock market.

The Threat

According to reliable data, Russia might attack Ukraine any day now, and the Russian military is prepared to start an invasion of Russian President Vladimir Putin orders it. US President has warned Putin of severe costs if the war begins.

Bad Friday

Last Friday, investors got a taste of what market shock to expect if the Russia-Ukraine war. The US stocks extended a selloff and ended sharply lower. The Dow Jones Industrial Average or DJIA reduced by 1.43%, and S&P 500 SPX reduced by 1.90%. Also, oil futures, 0.17%, increased to a seven-year high. There was a round of buying interest in traditional safe-haven assets, and it pulled down Treasury yields TMUBMUSD10Y, 1.925%. Interestingly, gold surged 0.84%, and the US dollar rose by 0.25%.

The Call

US President Joe Biden and Russian President Vladimir Putin spoke via telephone on Saturday to try to de-escalate the crisis. However, there was no breakthrough. The White House stated that Biden “was clear that, if Russia undertakes a further invasion of Ukraine, the United States together with our allies and partners will respond decisively and impose swift and severe costs on Russia.”

What the Investors Should Know?

Ø  Energy Prices Will Rise

Energy prices are expected to reach $100 a barrel for the first time since 2014. As Russia is also a key supplier of natural gas, those prices could also increase across the world.

Ø  Impact on Treasury

Investors consider Treasury as a haven when there is geopolitical uncertainty. However, treasury yields slid on Friday. They were vulnerable to pullback after surging on Thursday after a hotter-than-expected January inflation.

Ø  More Volatility for Stocks

The uncertainty regarding the Russia-Ukraine war will probably lead to more stock volatility in the near future. Experts also highlighted that US equities usually get over geopolitical shocks quite fast.

Ø  Panic Sells Should be Avoided

Many experts who have analyzed past geopolitical crises and are studying this one too are advising people not to sell into a panic. The crisis is usually over within six months and even less than that. For instance, after the 9/11 tragedy, Dow fell 17.5% to reach a new low, but the market recovered quickly to trade above the September 10 level in just six weeks, on October 26.

Ø  Gold Performance

If the Russia-Ukraine war happens, it will positively impact the performance of gold as most investors consider it a safe haven commodity.

Ø  Bitcoin Performance

Bitcoin (XBT), which is referred to by some crypto bulls as digital gold, fell and might fall further if the war happens.

Ø  Defense Stocks Might Rise

Defense stocks like L3Harris (LHX), Northrop Grumman (NOC), and Lockheed Martin (LMT) might also perform better in case of war because, in such times, there will be expectations of more demand for military spending.

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Also, read about differences in investing in the US vs. Canada over here.

Final Words

All in all, it can be said that if Russia attacks Ukraine, it will be enough for global markets to tumble. So, it would be best if you were more cautious as an investor.




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