What effect will the Russian/Ukraine crisis have on global markets?

What effect will the Russian/Ukraine crisis have on global markets?

What risks does the Russia-Ukraine Crisis have for the global economy?

Wednesday 2 March, 2022

Events in Eastern Europe continue to send shockwaves around the world. Recent scenes of the road to Kyiv showing miles upon miles of Russian tanks making their way towards the capital may indicate that Vladimir Putin is becoming frustrated with his army’s lack of progress and aims to tackle that with increased brutality. What has been promising is the West coming together to sanction the Kremlin and whilst this may not have an immediate impact in slowing down their advances, it will certainly make Russian officials contemplate how sustainable this conflict is for their economy. The global financial markets should come through the conflict relatively unscathed, but there are certain risks around trade and supply shortages that are worth highlighting. 

Banks

It was initially thought that wider economic impacts would not be felt globally., However, events over the weekend have changed the tone somewhat. We have seen sanctions announced on the Russian central bank and several Russian banks being excluded from SWIFT. This will have a major impact for its exporters and banking sector and may have spill-over effects should exposed institutions (notably banks) fail or require significant support.  

Energy

Russia could very well retaliate to recent sanctions and cut off oil and gas supply entirely. The largest European economies could probably cope with this given the seasonal shift to milder weather and their relatively healthy stocks of energy. However, energy-intensive parts of the industrial sector would be more badly affected, along with economies who rely heavily on Russian energy and where energy stocks are lower.

Trade 

Another risk relates to trade flows and shortages of goods outside the energy sector. Global supply chain issues are already struggling to get back to normal following the pandemic and shortages remain severe. Whilst Russia is not a large manufacturer of goods, it does control the supply of certain key commodities including metals like palladium and gases such as xenon – crucial components in the production of semiconductors. This could well put further pressure on the auto sector. 

The duration of the war, and whether sanctions succeed in curtailing it, is key to how much of an impact it could have on growth via higher prices and further supply chain issues. However, it may also impact market sentiment too. The extent of these risks will depend heavily on Russia’s actions and on the response from the West, which is highly uncertain. 

Important information

This document is a marketing communication which is provided for informational purposes only and is intended for confidential use by the recipient. It is not to be reproduced, copied or made available to others. This is not an investment research report as defined by the Financial Conduct Authority and has not been prepared in accordance with legal requirements designed to promote the independence of investment research. The information presented herein is insufficient for making an informed investment decision. This document is considered to be a general market commentary and does not constitute advice or a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. This document is not intended and should not be construed as an offer, solicitation or recommendation to buy or sell any investments. You are recommended to seek advice concerning suitability of any investment from your investment adviser. 

Past performance is not a reliable indicator of future performance; and the value of investments, as well as the income from them can go down as well as up, and investors may get back less than the original amount invested. 

The information and opinions expressed herein are based on current public information we believe to be reliable; but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information herein is given in good faith, but is subject to change without notice. No liability is accepted whatsoever by Lonsdale Services or its employees and associated companies for any direct or consequential loss arising from this document. This document is not for distribution outside of the United Kingdom. 

Lonsdale Services Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register number: 225488.The Financial Conduct Authority does not regulate Estate Planning, Lonsdale Pension Trustees Ltd, Tax Planning, Offshore Investments or Lifetime Financial Planning. The value of tax relief depends on your individual circumstances. Tax laws can change.
Registered in England: 04573693. Registered Office: 3 Curo Park, Frogmore, St Albans, Hertfordshire, AL2 2DD. 

 

Latest News Next Article Previous Article

Need financial planning advice?

If you would like a free initial financial planning review, complete the form below, or contact our St Albans, Barnet, Harpenden, Leeds & Bradford, Stafford, Ringwood, Ware, Wimbledon or Chippenham office.

Award one Award one Top 100 Advisers