The worst case scenario became reality - Russia launched a military invasion of Ukraine. Panic reaction was spotted across global financial markets at first but some relief came later on when Western sanctions on Russia turned out to be less severe than feared. Russia-Ukraine conflict is expected to remain the main driver in the markets in the days to come with RUS50, GOLD and OIL being some of the most impacted markets.
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Russian stock market indices plummeted over 40% on Thursday after Putin authorized invasion of Ukraine, as investors trimmed bets on Russian shares in anticipation of Western sanctions. Less than half of those losses were recovered on Friday. However, Western sanctions on Russia are only starting to take effect and more sanctions will be announced if Russian aggression continues to escalate. One thing looks sure, RUS50 is likely to be one of the most volatile European markets.
Gold price spiked above $1,950 as Russian launched an offensive against Ukraine. However, the price pulled back later on and dropped to $1,900 area. On one hand, gold is gaining on its safe haven status. On the other hand, war is an inflationary event and more tight policy may be needed to tame it. However, will central banks decide to tighten quicker at times of such uncertainty? Fed Chair Powell will appear for semi-annual congressional testimonies next week on Wednesday and Thursday, and it may shed some light on the future outlook.
Oil prices jumped above $100 per barrel for the first time since 2014 amid concerns that Russia-Ukraine conflict may impact global supplies. No disruptions to oil flows through Ukraine have been reported yet but the Kremlin may resort to energy blackmail in case the West levies more sanctions on Russia. Oil prices gave back part of gains on Friday but the $95 area looks like a strong support for Brent. A big question for oil traders now is whether Russian aggression towards Ukraine will impact relationships within OPEC+ alliance.
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