Markets appear to be reacting to military developments in Ukraine. Russia’s stock market usually trades in sync with oil prices. But recently, as oil hits new highs, Russian stocks have fallen into a bear market, likely tied to the rising risk of a Russian incursion into Ukraine.
Stocks and oil prices
Russia’s buildup of military forces around Ukraine is larger in scope than the exercises of March 2021 and echoes the Russian invasions in Georgia in 2008 and Ukraine in 2014. As in 2014, both the U.S. and NATO have communicated that they are not considering the deployment of their forces to Ukraine to repel a Russian invasion.
The human costs of military action are unmeasurable. Yet, the stock market reaction to an incursion or invasion of Ukraine may echo those of the past with little measurable impact for diversified investors. Previous incidents involving Russia had little impact to the markets. Most similarly, Russia’s invasion and subsequent annexation of Crimea from Ukraine in 2014 saw the S&P 500 and other developed and emerging markets around the world dip less than 2% on the day it occurred and rebound at least partially during the following five days.