Tel No 01454 321511

Contact Us

Investments and the Ukraine Crisis

Investment / Investment commentary Archives

What has Happened so Far

Tensions between Ukraine and Russia have been a recurring feature since Ukraine’s independence in 1991.

Russia began moving troops to the Ukrainian border in the spring of last year but largely pulled back by June 2021. More were then deployed in October/November before moving troops to Belarus in January 2022 – citing they were doing so as part of training exercises (joint Belarus & Russia military training is widespread in ‘normal times’). As of the end of last week, it was estimated up to 190,000 Russian troops were near the Ukrainian border.

This year, intelligence has warned of an impending invasion by Russia in Ukraine, with Western powers rallying behind Ukraine, promising tough sanctions against Russia if it invades. On February 22nd, President Putin ordered Russian troops into two rebel-held regions in eastern Ukraine (Luhansk and Donetsk) after recognising them as ‘independent states’, claiming the troops are needed for peacekeeping. Since then, President Biden has prohibited new investment, trade, and financing by Americans in the region. Prime Minister Boris Johnson and the EU have announced further sanctions (on diplomats, banks, and broader Russian financing sources). Australia and Japan shortly followed this.

In the early hours of February 24th, Russian forces entered Ukraine from several places in the North, South, and East of Ukraine, including from Belarus – a long-time Russian ally. Russian troops also arrived by sea in Ukraine’s major port cities to the south of the country. The attacks have targeted military infrastructure and border units in Ukraine’s major cities, including the capital city, Kyiv. President Putin has described the attacks as a ‘special military operation’ to defend people in breakaway areas.

Western nations are expected to unveil further sanctions against Russia throughout the day, and many political leaders have already spoken out against the attacks, with President Biden describing the attacks as “unprovoked and unjustified” and stating that “the world will hold Russia accountable.”

Market Reaction

2022 was already off to a bumpy start, with surging inflation causing fears of overly aggressive monetary policy. The possibility of a Russian invasion in Ukraine had further increased market uncertainty, which had already led to falls in global equity markets and increases in the price of safe-haven assets such as US Treasuries and Gold over February. News of Russian troops entering Ukraine in the early hours exacerbated these moves, with the FTSE 100 down around 3% and other European indices down as much as 5% as of noon February 24th, and the price of gold and US Treasures rising further.

As you might expect, Russian assets have felt the most pain with expectations of further sanctions from Western countries. The Russian Equity market was already down almost 30% from its peak in October (when Russia redeployed troops to the Ukrainian border) before falling a further 30% today after troops entered Ukraine. Russian bond yields have also increased from around 7% in the Summer of 2021 to around 13% now, and the Russian rouble has also been at its lowest level against the US dollar since 2016. Additionally, given the importance of Russian supplies for oil and natural gas, the prices of both these commodities have risen, with the price of oil rising above $100 for the first time since 2015 and gas pricing rising over 10% today.


How the situation evolves is uncertain and unpredictable; however, as always, the best defence against uncertainty is diversification across asset classes, regions, currencies, and styles.

The situation could undoubtedly get worse from here. Russia could launch a full-scale invasion across the whole of Ukraine with the intent to occupy all regions, which could lead to military involvement from Western powers. This would lead to a further drop in equity markets (and a rise in safe-haven assets). However, a lot of uncertainty has now been priced into markets, and any stabilising of the situation would settle equity markets.

Commodity price rises have benefited energy companies, and rising interest rates have been positive for financials. This has given a boost to more ‘value’ positions in portfolios, which have held up well so far this year.

Trying to time markets is inherently challenging and has been proven to erode long-term value over time. It is natural to feel uncomfortable when markets experience short-term volatility; however, it is important not to lose sight of long-term financial goals.

Overall, portfolios have exposure to a wide variety of assets that are likely to be less impacted by the situation between Russia and Ukraine and in some situations may even benefit. However, we will monitor the situation closely and keep you updated.

Latest Posts

Get in touch

Book an introductory call with one of our planners to discuss what’s important to you…

Fill out our callback form, and one of our local advisors will contact you at a convenient time.