Russia-Ukraine Crisis Spooking Markets, But Rebound May Extend

European markets are tumbling this week as a result of renewed tensions between Russia and Ukraine. NATO estimates that Vladimir Putin, the Russian leader, has ordered more than 130,000 troops to the Ukrainian border, poised for an invasion of the country’s northern reaches, before a march cross-country to Kyiv in the spring.

Appeals For Calm

In the US, Secretary of State, Antony Blinken, made an urgent appeal for calm on Thursday 17 February, asking Russia to de-escalate its military activities and return to the negotiating table.

The Kremlin responded by saying that it had withdrawn troops, though NATO intelligence officials later rubbished this claim.

The Effect On Stocks

The US stock market posted its worst trading day of the year so far, sliding more than 600 points on Thursday 17 February. Fears in New York of a Russian invasion and American military response from the Biden administration rattled investors.

Asia-Pacific shares also slid overnight as tensions in Eastern Europe for the same reasons. However, Blinken’s comments helped to curtail the sell-off as hopes for a diplomatic solution remained.

Risks Overblown?

Traders, however, may be overblowing the risks of the Russian invasion. While Russia was once a superpower, the country is now in a strategically weak position and getting weaker with each passing year.

The current moves have not triggered a military reaction from NATO thus far.

The invasion of Ukraine has seen further sanctions placed on the country, reducing its foreign exchange earnings and leading to a devaluation of the rouble.

Furthermore, Russia is currently experiencing an Italian-style demographic crisis. Given its low fertility rate and ageing, unhealthy population, it simply cannot afford to lose the lives of thousands of young people in war.

Traders, as always, must tread carefully but avoid panic.