Financial markets witnessed significant downward pressure on Tuesday as geopolitical tensions reached new heights following reports of Ukraine’s deployment of US-manufactured long-range missiles into Russian territory, coupled with Vladimir Putin’s revision of Moscow’s nuclear doctrine.
The mounting unease saw investors rushing towards safe-haven assets, with the US dollar, Japanese yen, and Swiss franc experiencing notable gains. The situation intensified after RBC-Ukraine confirmed Kyiv’s inaugural strike on Russian soil using Western-provided weaponry, specifically targeting the Bryansk region with six US-made Atacms missiles.
European markets bore the brunt of the escalation, with the Stoxx 600 plummeting more than 1% to reach its lowest point since August. The FTSE 100 displayed similar weakness, declining 0.5% to hover near three-month lows at 8,070 points. Across the Atlantic, American markets opened lower, with the Dow Jones Industrial Average dropping 0.8% and the S&P 500 shedding 0.4%.
The revised nuclear doctrine, signed by Putin, introduces a crucial modification whereby any conventional attack on Russia supported by a nuclear-capable nation would be considered a joint assault. This development has heightened concerns about potential nuclear escalation, causing Wall Street’s fear gauge, the CBOE Volatility Index, to surge nearly 10%.
Government bonds emerged as a favoured sanctuary, with yields declining across UK, US, and eurozone debt instruments. Adding to market anxieties, reports emerged of mysteriously severed undersea cables in the Baltic, with German defence officials suggesting possible sabotage.
The market response underscores growing investor apprehension about the trajectory of the Ukraine conflict, which has now surpassed its 1,000th day. As geopolitical tensions continue to mount, market participants remain vigilant for signs of further escalation and its potential impact on global financial stability.
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