What will happen to the markets if Putin invades Ukraine?

By Simon Constable

Let us forget for a moment the Omicron mutation and focus on another threat to the financial markets: the -possible- Russian invasion of Ukraine.

Some experts believe that such a development is not just a possibility. Once this estimate is confirmed, investors should be prepared for “extreme volatility” in stocks, bonds and commodities. In addition, an aggressive move by the Kremlin would force some countries to take military action even in other parts of the world.

“The invasion will take place,” wrote General Spider Marks in a recent report by the New York-based financial services academy Securities. “It will take place until January-February 2022.”

A possible coup in Kiev

Marks says Russian President Vladimir Putin’s goal is to liberate the Donbas region in eastern Ukraine, where Russian separatists have been conducting small-scale military operations in recent years.

“Putin will continue to undermine [τον πρωθυπουργό της Ουκρανίας] “There will be a crisis of confidence in his leadership,” Marks said. from the Kremlin.

Waiting for winter?

One reason Marks bases his assessment of Russia’s invasion of Ukraine in January or February – without mentioning it – is the weather. At the moment, a Russian attack is in danger of “sticking” to muddy ground; a parameter that may not be a problem for the Infantry, but for the rest of the Corps – such as the Armor and the Artillery. Heavy equipment will be “sunk” in the mud and the momentum of the attack will be stopped. Entering the heart of winter, during the months of January-February, the ground will freeze, allowing the Russian motorized forces to advance in a flash.

Other geopolitical experts do not “see” Moscow taking immediate military action. The concentration of troops and military equipment in western Russia is aimed at exerting political pressure on Kiev and “falling” the government. In other words, Moscow does not want to be considered a “perpetrator”, but wants the result Marks suggests: control of Ukraine.

The Russian invasion could “sink” the markets

If and when the Russian attack unfolds, investors will panic and “gather”. “If Russia invades, I expect not only to boost global energy prices, but also to bring interest rates down in a wave of risk-offs,” wrote Peter Tchir, a macroeconomic analyst at the Academy.

Simply put, oil prices, such as those monitored by the US Brent Oil Fund (BNO), are likely to skyrocket as Europe relies more heavily on energy imports to Russia than to any other producer.

Borrowing costs will also fall as investors seek safe haven in US government bonds, pushing the dollar and US 10-year yields even lower than they are today.

The shares, which are monitored by the SPDR S&P 500 ETF mutual fund, may “sink”.

“Things could get even worse,” Tchir wrote. In short, the tensions will escalate, causing more turmoil in the markets.

Read also:

* Ukrainian: A crisis with 14-year-old roots – How Putin’s threats are being handled now

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