Feb 27, 2022|رؤى السوق- 3 min

The impact of the standoff between the two nations is already felt in higher gas prices[2], and may extend to the world economy if the conflict escalates.

In this article, we review some of the key data so far.

Russian markets

The prospect of a sustained armed conflict has already raised the prospect of more severe economic sanctions from the US and other major trading partners[3]. These will impact the Russian economy first and foremost, and markets are already pricing this in.

Stocks: Decline in the MOEX

On February 21st, Russia’s benchmark index (MOEX) dropped 11%, as roughly three-quarters of the companies listed fell to 52-week lows (see chart below).

Source: Bloomberg

This is the biggest fall in the MOEX since the global financial crisis in 2008 that was driven by falling oil prices and fears concerning the Russian-Georgian war[4].

Impact on the Ruble

Aside from the equity markets, the geopolitical tension surrounding the prospect of a Ukrainian conflict is placing pressure on the Russian Ruble.

The Russian ruble has weakened markedly since the beginning of the crisis. The recognition by Putin[5] of two separatist-controlled states in Eastern Ukraine on February 22 brought the ruble to US dollar rate near its previous record of 82.4 in 2016, before rising another 10% to 87.8 on February 24 following the announcement of the beginning of Russian military operations in Ukraine[6].


Source: Bloomberg 

Global markets

The effects of the conflict on the global economy begins with global energy markets.

Gas prices

Germany has already frozen developments of the new Nord Stream 2[7] gas pipeline project in response to the actions taken by Russia. Furthermore, the knock-on effect of sanctions from the U.S. and Europe could significantly reduce oil and gas trading between Russia and European Union (EU), if not halt it altogether[8].

Russia is Europe’s largest energy source, supplying roughly 27% of its oil[9] and 35% of its natural gas[10]. Awareness of the European gas reaching record prices in December (see chart below) given the EU’s reliance on Russia for energy.

Source: Refinitiv Datastream/Karin Strohecker

Wider economic repercussions

A possible rise in oil prices to $150 per barrel[11] risks reducing global GDP growth to 0.9% in the first half of the year, while increasing inflation to 7.2%[12].

This would affect the profitability of publicly listed firms across the world, especially European firms that own stakes in Russian energy companies[13].

European banks that face the highest risk[14]. French and Austrian banks have the largest loan exposure to Russia ($24.2 billion and $17.2 billion, respectively), followed by U.S. lenders at $16 billion, and Japanese and German banks at $16 billion and $8.8 billion, respectively.

Source: Refinitiv Datastream/Karin Strohecker

Conclusion

The fundamentally unpredictable situation in the short term makes speculative trading riskier than usual, especially with the number of countries involved in the nearly decade-long history of the conflict.

Until the scale of the conflict and the reaction of world powers is better known, the long-term effects are also hard to predict. The wisest strategy would be to avoid predicting the short-term and focus instead on long-term investing, risk diversification and asset allocation.

 

 

 

[1] Britannica.com - https://www.britannica.com/topic/Ukraine-crisis
[2] USA Today - https://www.usatoday.com/story/money/economy/2022/02/23/gas-prices-russia-ukraine-invasion/6893130001/?gnt-cfr=1
[3] The Guardian - https://www.theguardian.com/world/2022/jan/30/ukraine-crisis-us-sanctions-russia-putin
[4] The Telegraph - https://www.telegraph.co.uk/business/2022/02/21/ftse-100-markets-live-news-house-prices-shares-covid/
[5] New York Times - https://www.nytimes.com/live/2022/02/21/world/ukraine-russia-putin-biden
[6] Time - https://time.com/6150679/russia-ukraine-war/
[7] Reuters - https://www.reuters.com/business/energy/germanys-scholz-halts-nord-stream-2-certification-2022-02-22/
[8] NBC - https://www.nbcnews.com/news/world/russia-ukraine-crisis-severe-sanctions-trigger-crippling-moscow-respon-rcna13691
[9] Bloomberg - https://www.bloomberg.com/news/articles/2022-02-10/russia-and-europe-are-vital-to-each-other-when-it-comes-to-oil
[10] Reuters - https://www.reuters.com/business/energy/what-are-europes-options-case-russian-gas-disruption-2022-02-15/
[11] Business Insider - https://markets.businessinsider.com/news/commodities/oil-price-outlook-russia-ukraine-tensions-150-per-barrel-supply-2022-1
[12] Reuters - https://www.reuters.com/markets/europe/how-russia-ukraine-conflict-might-hit-global-markets-2022-02-19/
[13] Reuters - https://www.reuters.com/business/energy/companies-with-exposure-russia-react-ukraine-crisis-2022-02-22/
[14] Reuters - https://www.reuters.com/markets/europe/how-russia-ukraine-conflict-might-hit-global-markets-2022-02-19/


About The Family Office

Since 2004, The Family Office has been the wealth manager of choice for more than 200 ultra-high-net worth families and individuals, helping them preserve and growth their wealth through customized solutions in diversified alternatives and more. Schedule a call with our financial experts and learn more about our wealth management process.

Keep reading

من نحن

نبذة عامة فلسفة الاستثمار أعضاء مجلس الإدارة الفريق القيادي مواقعنا
تواصلوا معنا

مكتب المنامة:

الطابق التاسع، برج الزامل شارع الحكومة المنامة 305 مملكة البحرين

bahrain flag+973 1757 8000

مكتب دبي:

أبراج سنترال بارك، مركز دبي المالي العالمي (DIFC) الطابق 21، المكاتب 21-43 دبي، الإمارات العربية المتحدة

uae flag+9714 8343863

مكتب الرياض:

سيغنيتشر سنتر، جناح 102 شارع الأمير تركي بن عبدالعزيز الأول حطّين ، الرياض 13512 - 2110 المملكة العربية السعودية

ksa flag+966 11 250 7720

MVPwebsiteAR

مستعدون لبدء رحلتكم الاستثمارية؟

اضغطوا هنا للبدء my.tfoco.com/ar/register

The Family Office Co. BSC(c) هي شركة استثمارية من الفئة الأولى تخضع لرقابة مصرف البحرين المركزي، ومُرخّصة بسجل تجاري رقم 53871 صادر بتاريخ 21/6/2004، وبرأس مال مُصرّح به ومدفوع قدره 10,000,000 دولار أمريكي. ولا تُقدّم The Family Office Co. BSC(c) منتجاتها وخدماتها سوى إلى "مستثمرين معتمدين" على النحو المحدد من قِبل مصرف البحرين المركزي.

الأسئلة الأكثر تكراراًمبادئ حوكمة الشركاتسياسة الخصوصيةخريطة الموقع