The Ukrainian crisis spills over into global markets, from stocks to gold. Medvedev threatens Europeans with gas prices

After Russian President Vladimir Putin recognized two self-proclaimed separatist republics in eastern Ukraine, Russian stocks fell by as much as 19 percent, and as reported by Bloomberg, investors sought refuge in gold and U.S. Treasury bonds.

The Russian ruble fell to its lowest level since November 2020, although it has since rebounded, and the tension has also led to a spike in oil prices to their highest level in the last seven years. Brent crude, the international benchmark, rose by as much as 3.2 percent to $98.49 per barrel, the highest level since 2014. Prices of natural gas have also increased, according to the Financial Times.

Charlie Robertson, chief economist at Renaissance Capital, believes that if this situation escalates into war, natural gas prices in Europe will pose the greatest threat to the global economy.

– Oil could rise another 10 or 20 dollars, but natural gas, due to Europe’s dependence on it, could rise even more – says Robertson.

The Deputy Chairman of the Russian Security Council and former President of Russia Dmitry Medvedev took to Twitter after German Chancellor Olaf Scholz stated that Germany would halt the certification process for the Nord Stream 2 pipeline.

– Welcome to the brave new world where Europeans will very soon pay 2000 euros for 1000 cubic meters of natural gas – wrote Medvedev.

Additional Risks

The benchmark MOEX index has fallen by more than 30 percent from its record in October last year, with most of those losses occurring this week.

Shares of Russian companies listed abroad have also been under strong selling pressure. The MSCI index tracking Russian stocks traded in London and New York has lost nearly 30 percent of its value this year.

Additionally, gold prices rose in February as investors sought safer investments.

Shares of the state energy group Gazprom, which has lost about a quarter of its value since the beginning of the year, rose nearly 2 percent on Tuesday, preventing a decline in the MOEX, while shares of the oil and gas group Tatneft rose by more than 5 percent. Shares of Rosneft, another major oil and gas company, fell by 3.9 percent, while the Russian internet group VK fell by 7.9 percent.

As strategists from JPMorgan, led by Croatian Dubravko Lakoš-Bujas, told Marketwatch, the tension between Russia and Ukraine poses a low risk to the earnings of U.S. corporations, but the shock from energy prices due to the aggressive pivot of central banks aiming to tame rising inflation could further dampen investor sentiment and growth prospects. Amid the uncertainty of this crisis, ‘the tightening of monetary policy, in our opinion, remains a key risk for stocks as central banks attempt to re-anchor lower inflation expectations,’ said the JPMorgan team.

However, the greatest impact on Russian stocks comes from the growing concern over sanctions from Western countries. The Financial Times reports that U.S. Secretary of State Antony Blinken condemned this move by Russia as a ‘clear attack’ on Ukraine’s sovereignty, while European Commission President Ursula von der Leyen stated that Russia’s advance, which Putin characterized as a ‘peacekeeping exercise,’ represents a ‘violation of international law.’