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Ukraine: faced with the risk of an invasion by Russia "at any time", the stock market retreats

After the White House warned of an imminent Russian invasion of Ukraine on Friday, the stock market fell sharply. At issue: the uncertainty surrounding the economic consequences of such a conflict, and the threats of sanctions from the European Union. Conversely, the barrel of oil recorded a rare price peak.

Ukraine: faced with the risk of an invasion by Russia "at any time", the stock market retreats


Despite attempts at de-escalation led by Emmanuel Macron and Joe Biden, the situation on the Russian border continues to escalate. From the start of the month, French Foreign Minister Jean-Yves Le Drian explained that " all the elements were in place for an intervention ". On Friday, February 11, White House national security adviser Jake Sullivan concurred in this observation, solemnly warning that an invasion of Ukraine could take place " during the Olympic Games ", which are held in China until the 20 February.


Faced with the threat, Washington asked American nationals to leave Ukraine within 48 hours. Soon after, the UK also advised its citizens in the country to return " by commercial means, as long as they remain available ". And this Saturday morning, it was Belgium's turn to do the same.


The threat of invasion weighs on the stock market

Frightened by these signals of a possible imminent Russian invasion, the New York Stock Exchange saw its decline accelerate. At Friday's close, the Dow Jones ended down 1.43%, the Nasdaq index plunged 2.78% and the broader S&P 500 index 1.90%. Earlier, European indices had continued to fall, in line with Thursday's losses on Wall Street. Paris lost 1.27%, Milan 0.82%, Frankfurt 0.42% and London 0.15%. With the exception of a few energy stocks, red was everywhere, including among the largest capitalizations on Wall Street, such as Apple (-2.02%) and Microsoft (-2.43%).


" There is a lot of nervousness in the stock market ", analyzes Peter Cardillo, of Spartan Capital, before developing: " if they invade, obviously, it will put pressure on stocks. This means that prices will go up above all in energy and raw materials and that disposable income will decline ."


This is not the first time the market has reacted to the situation in Ukraine, where tensions have been going on for months. But the peak reached yesterday could be a trigger. " If the market hadn't fully priced in the risk of a Russian incursion into  Ukraine, it could well start doing so," said Art Hogan, chief strategist for National Securities. Inevitably, the market is risk-averse, and the specter of serious consequences for the European economy is worrying.


" If an invasion were to occur, it's conceivable that stocks could see another decline of around 10%, with investors selling first and asking questions later," said John Lynch, chief investment officer at Comerica Wealth Management.


The barrel of oil at its highest since 2014

Among the rare stocks to float on Friday in New York, oil companies, such as Chevron (+2.04%), ExxonMobil (+2.52%) and Marathon Petroleum (+1.82%), as well as the chemical group Dow ( +0.23%) or the Mosaic mining (+2.07%).


Similarly, the price of a barrel of Brent from the North Sea for delivery in April ended on a jump of 3.31% to 94.44 dollars, the highest since September 2014. And in New York, the barrel of West Texas Intermediate (WTI) for March delivery rose 3.58% to $93.10, also the highest in more than seven years. The barrel of American oil had even climbed by more than 5% at the beginning of the afternoon just after the declaration of the White House: the curve of the prices of black gold had suddenly jumped, making almost two dollars per barrel in less than half an hour.


“ Under these circumstances, the oil market does not want to be taken aback over the weekend and is gripped by concern that an invasion by Russia could provoke sanctions which, in conjunction with the invasion, could result in supply disruptions, "says Andy Lipow.


Fear of potential sanctions

If the market is reacting this way, it is mainly because Western leaders have brandished threats of " swift and drastic " sanctions against Moscow in the event of an invasion. They would first target the financial and energy sectors, as well as exports of high-tech products, European Commission President Ursula von der Leyen announced on Friday during a videoconference with US President Joe Biden.


All the options on the table, specify its teams, which offers no guarantees to the markets, already fearful. This Saturday, Joe Bien and Emmanuel Macron will again meet with Vladimir Poutine, in exchanges that look like the last chance.

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