Oil and gold prices have spiked while major European stock markets plummeted in early trading after Russian president Vladimir Putin pressed ahead with an invasion of Ukraine.
Tensions have been growing for several weeks, with many countries imposing sanctions on Russia in an attempt to dissuade it from attacking its neighbour, but yesterday reports emerged of explosions in several Ukrainian cities.
US president Joe Biden tweeted that he “condemned this unprovoked and unjustified attack”, adding that there would be discussions at the UN Security Council this evening.
The move has had an immediate impact on stock markets. The FTSE 100 opened down 2.4%, while the German DAX dropped 3% and French CAC 40 fell 2.6% in early trading.
The Russian market moved furthest, however, with the rouble-denominated MOEX down 35% and the dollar-denominated Russian Stock Market Index (RTSI) down 40% – its worst day on record. The rouble also plunged 7% versus the dollar, despite intervention from the Russian central bank.
In contrast, oil prices spiked, with Brent crude going above $100 (£74.3) per barrel and West Texas Intermediate rising to $97. Gold also rallied to above $1,950 – its highest level since 2020.
Cryptocurrencies such as Bitcoin (down 5%) dropped. Neil Wilson, chief market analyst at Markets.com, said: “I think we are finding out which of the two is the real haven.”
He added that the market had been complacent about the impending invasion in the hope that incursions could be limited. He also warned it could have a broader impact, suggesting China may “look to Taiwan”.
In the UK, PolyMetal International and Evraz – two mining companies with significant assets in Russia – were the biggest fallers in early trading, down 35.9% and 22.7% respectively.
Travel companies such as International Consolidated Airlines and plane engine maker Rolls Royce also dropped 14.6% and 6.3% in early dealing.
Lloyds Banking Group was another significant faller, down 9.7% as investors feared the attack could lead to reduced consumer confidence.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Lloyds shares fell steeply on news of the Ukraine crisis. As a more traditional bank, Lloyds has more exposure to the ups and downs of the UK’s economy.
“While slightly more sheltered from international turbulence, the tragedy of the Ukraine crisis and the unknown implications have made their presence known in the UK’s market.”
Wilson said that there was likely to be considerable pressure on risk assets in the coming days and weeks, but noted that this would “inevitably lead to some babies being thrown out with the bath water”, noting that we were probably close to peak fear.
Conversely, Brian Dennehy, managing director at financial advice firm Dennehy Weller & Co, advised investors to move to 50% cash in the wake of the announcement.
“This is broad-brush. Some of you may go further, others of you may not wish to take any action. Obviously it is your call as a self-directed investor,” he said in an email to clients.