Photo source: War Room – U.S. Army War College
Global stock markets experienced declines while bond prices surged amid escalating concerns over the ongoing conflict in Ukraine.
Reports indicated that Ukraine had launched a U.S.-made long-range missile into Russian territory for the first time, coinciding with Russian President Vladimir Putin’s approval of changes to the country’s nuclear doctrine.
On Tuesday, investors flocked to safe-haven currencies, including the U.S. dollar, Japanese yen, and Swiss franc, following news from RBC-Ukraine that Kyiv had executed its initial strike on Russian soil using Western-supplied missiles.
Moscow later confirmed that six U.S.-manufactured ATACMS missiles were fired at the Bryansk region of Russia, a move that followed President Joe Biden’s recent decision to ease restrictions on their deployment.
Earlier that day, Putin signed a decree that lowered the threshold for nuclear weapon use. The revised nuclear doctrine states that any conventional attack on Russia by a nation backed by a nuclear power would be regarded as a coordinated assault.
As fears grew regarding the escalation of the conflict—now surpassing 1,000 days—European stock markets reacted negatively. The Stoxx 600 index fell over 1%, reaching its lowest point since August. The UK’s FTSE 100 index dropped 0.5% in afternoon trading, nearing a three-month low at 8,070 points.
In the United States, markets opened lower, with the Dow Jones Industrial Average declining by 0.8% and the broader S&P 500 losing 0.4%. The Chicago Board Options Exchange’s CBOE Volatility Index, often referred to as Wall Street’s fear gauge, spiked nearly 10%.
Market analyst Fawad Razaqzada from City Index and FOREX.com noted that investors were “rattled” by Ukraine’s use of U.S.-supplied long-range missiles against Russia, which negatively impacted the euro.
“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,” he added.
In foreign exchange markets, the British pound fell by a third of a cent against the U.S. dollar to $1.265, while the euro depreciated by 0.25% against both the Swiss franc and the dollar.
“Geopolitical does not matter for financial markets until it does… When U.S. equipment is striking Russia and Russia mentions nuclear, you have to pay attention,” stated Brad Bechtel, global head of FX at Jefferies.
Additionally, government bonds from the UK, U.S., and eurozone emerged as popular safe-haven investments, leading to a decrease in yields or interest rates on government debt.
Investors were also unsettled by reports of two undersea cables in the Baltic being mysteriously severed, with German Defense Minister Boris Pistorius suggesting sabotage might be involved.
Furthermore, analysts observed that the market rally following Donald Trump’s election victory two weeks prior appeared to have lost momentum, contributing to falling share prices at the end of last week. Concerns were raised about potential disruptions in various industries due to Trump’s proposed policies on trade tariffs and immigration enforcement.