Global equities plunged and the Russian rouble slumped to a record low as fears about mounting tensions in the Ukraine drove investors away from risky assets to safer bets such as bonds and the Japanese yen.
As tensions between Moscow and Kiev intensified this week, the deteriorating political and diplomatic situation heaped pressure on stocks, not least those of Russia, where the MICEX stock index tumbled 11 percent in early trade on Monday.
European stocks were badly hit, with the Dax down 3 percent and the FTSE losing roughly 2 percent, while Asian markets were also lower.
Companies with the greatest exposure to the region were on the back foot. For example Carlsberg was down almost 5 percent.
Bond yields were also lower, while gold climbed to a four-month high as investors sought safety.
The biggest loser so far is the Russian rouble, which dipped to a record low against the US dollar. Meanwhile the crisis has also seen a big risk-off move by investors, with the JPY and CHF favoured.
USD/RUB fell 2.5 percent to 36.50, forcing Russia’s central bank to step in with a 150-basis point hike to the interest rate to seven per cent in a bid to protect its currency.
John J Hardy, Head of FX Strategy at Saxo, says the situation in the Ukraine is a “big deal” for the markets, in particular rouble pairs.
Although, as Ken Veksler of Acumen Management points out, the rouble had been on the slide against the dollar for a long time before the conflict flared up.
But Hardy also warns about the impact on the euro given European banks' exposure to €100 billion of loans to Ukraine.
“The question I have is what about Ukrainians themselves. … I think the risks of disruptions could be wider,” he said, citing the potential for gas supplies to Europe being affected.
Hardy notes that this has been a “big wake-up call” to the markets, which have been in a strong risk-on cycle lately.
There is a “real risk” of wider fallout further on down the road, while the situation creates a lot of “unknowns”, especially for Europe, he adds.
Any escalation in the conflict would hit Europe harder than other regions, despite the puniness of the Ukrainian economy, which is a third smaller than that of Greece.
The exposure of European banks to Ukraine’s external debt is important and the crisis could even impact European Central Bank policy if some of those loans underperform.
For Hardy, the biggest fear is the response within the Ukraine to the crisis, rather than the “large power confrontations”.
However, Steen Jakobsen, Chief Economist at Saxo Bank, does think the global power games matter and likens the crisis to a "reverse Berlin Wall" moment in which everyone will lose.
"This will increase volatility and the stock market will be under pressure as we all remember the 1998 devaluation," he said.
Will the markets stabilise in the wake of the initial crisis as the events in the Ukraine are priced in? Or can we expect further volatility as the situation in Ukraine worsens?