Russian benchmark index RTSI has shed over 25 percent since February 11, when the reports of escalating geopolitical tensions between Russia and Ukraine first surfaced.
On Monday, February 21, the Russian benchmark index tanked over 13 percent, plunging to their lowest level in 1 year as Russia recognised two breakaway regions in eastern Ukraine as independent and ordered troops to launch what Moscow called a peacekeeping operation in those regions.
Global markets also crashed after this development. Japan's Nikkei has lost over 2 percent since yesterday while China's Shanghai Composite has declined over a percent. UK's FTSE has shed over half a percent whereas other European indices CAC 40 and DAX have lost over 2 percent each. However, the US markets were closed yesterday but US futures are also in the red.
While Russia continues to deny plans of invasion in Ukraine, reports of Russian forces killing a group of five saboteurs, who breached the country's southwest border from Ukraine on Monday, further worsened the sentiment.
Not only equity markets, but Russian Rouble has also witnessed a steep fall. The rouble lost well over 2 percent on Monday. It also fell 2.3 percent to 89.55 against the euro, its lowest level since January 26, 2022.
While the prospect of a summit between US and Russia gives a glimmer of hope to investors, they are likely to remain cautious and continue selling till an agreement is reached.
Further, the decline in Russian markets was also adversely impacted amid fears of the US and UK imposing sanctions on the country if it invades its neighbour. As per reports, Washington has prepared an initial package of sanctions against Russia that includes barring US financial institutions from processing transactions for major Russian banks.
United States on Tuesday warned that Russia’s actions will have dire consequences across the globe.
This led to an over 19 percent fall in one of Russia's top banks Sberbank Rossii and an 18 percent decline in another banking stock Bank VTB. Meanwhile, oil major Rosneft's shares also dropped 15 percent on surging crude oil prices.
In a report, Reuters stated Goldman Sachs analysts saying that it now seemed plausible that geopolitical risks in the Ukraine-Russia standoff were starting to have a meaningful impact on global assets. Comparing the rouble with its high-yielding emerging market peers was a good measure of the amount of risk premium still priced into the rouble, they added.