Global stock markets fell and bond prices jumped after reports emerged that Ukraine fired long-range missiles into Russia. The escalation of hostilities led investors to shift to safe-haven currencies such as the US dollar, the Japanese yen, and the Swiss franc. Moscow confirmed that six US-made Atacms missiles were fired at Russia’s Bryansk region.
The tension increased after President Joe Biden relaxed restrictions on the use of such weaponry. Senior US and Ukrainian officials acknowledged the missile strikes into Russian territory. Putin’s revised nuclear doctrine now considers a conventional attack on Russia by any nation supported by a nuclear power as a joint attack.
This broadens the circumstances under which Russia might deploy nuclear weapons. The growing concerns over the full-scale invasion of Ukraine, now surpassing its 1,000th day, have significantly impacted global stock markets. The Stoxx 600 share index dropped over 1% to its lowest since August.
Tensions shake global financial markets
The FTSE 100 index was down 0.5% in afternoon trading, reaching a three-month low. New York markets opened in the red, with the Dow Jones Industrial Average falling by 0.8% and the broader S&P 500 losing 0.4%.
Wall Street’s fear gauge, the CBOE Volatility Index, soared by almost 10%. Market analyst Fawad Razaqzada said: “The big worry here is how Russia is going to respond now. President Vladimir Putin’s approval of an updated nuclear doctrine broadens the conditions under which Russia might deploy nuclear weapons, including in response to a large-scale conventional attack on its territory.
Use of atomic weapons is unthinkable, but we are getting close to very dangerous territories.”
In the foreign exchange market, the pound slipped against the US dollar to $1.265, while the euro lost 0.25% against the Swiss franc and the dollar. Brad Bechtel, global head of FX at Jefferies, remarked, “Geopolitical tension does not matter for financial markets until it does. When US equipment is striking Russia and Russia mentions nuclear, you have to pay attention.”
The uncertainty prompted investors to flock to government bonds in the UK, US, and eurozone, pushing down yields or interest rates on the debt.
Investors were also unsettled by the mysterious severing of two undersea cables in the Baltic Sea. As tensions continue to rise, markets remain on edge about the potential for further escalation and its impact on global financial stability.
