After all the worrying, the hard truth emerged overnight. Despite threats of severe sanctions on its financial and energy sectors, Russia has invaded Ukraine, and now markets are reacting. U.S. index futures are all down significantly, with the Nasdaq having fallen the most as of 5am EST. Approaching correction territory, indices have been hit hard the last couple of months, affected by both the Omicron variant of COVID-19 and tighter hawkish policy shifts from the Fed.
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Russia is the world’s second largest oil exporter by value of product exported, and Europe is largely dependent on this supply. Further sanctions on Russian oil markets have been threatened by the EU and the U.S., and OPEC will not be able to make up for the massive void left in production. Upon the breaking news of the active Russian invasion, oil prices skyrocketed and many forms of the energy source reached prices unseen since 2014.
Germany finds itself in an especially sticky situation, as it consumes huge amounts of Russian energy. The dependent country has been particularly quiet on the developing conflict, as its economy could be seriously disrupted by a complete halt in imported Russian energy sources. However, in response to the incursion, German officials have halted progress on the Nord Stream 2 pipeline, which had been planned to send huge amounts of gas from Russia to Germany.
The imposition of further sanctions on the Russian energy sector is not welcome news for the economically advanced central European nation.
In addition to the spike in oil costs, investors have been fleeing to safe-haven assets like precious metals and foreign currencies. This activity had already been a trend for the last few weeks, as the Fed takes aim at inflation by reducing its bond buying program, indirectly causing highly valued growth and tech stocks to slide.
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