Russia-Ukraine Crisis Fuels Market Volatility

With Russia’s escalation in Ukraine over the past week, markets have been on a roller coaster ride, with the stock market tumbling and commodity prices spiking. The VIX index rose above 30 levels, which indicates that investors are expecting higher volatility in the future due to increased uncertainty and risk. There might therefore be some opportunities to take advantage of.

Forex

If your strategy focuses on currency pairs, learn more about Forex trading techniques to be able to make the most of it. Here are a few things to consider about the current situation.

Increasing oil prices could cause long-term inflation and pressure the Fed (and other important nations) to act more quickly than expected in increasing their interest rates. And let’s not forget about the ruble, which dropped 30% against the American dollar, after which the country was cut off from the global bank payments system, forcing the Russian central bank to double interest rates.

Stocks

If your plan focuses on shares, then you should consider the recent market collapse as a good opportunity for you to think about rebalancing your portfolio and maybe diversify your investments a bit better.

Look at promising companies with strong fundamentals whose share price has been falling due to the Russian invasion of Ukraine. Some economic sectors will benefit from the situation, while others might be neglected by investors because of the sanctions imposed by Western Allies.

Commodities

Even if commodities aren’t part of your portfolio, it’s important to follow their price evolution, as they can influence heating costs, as well as food prices, which will, in turn, impact the purchasing power of households – not to mention that the rise of some commodities adds pressure to the inflationary environment, which might force central banks to increase their interest rates faster.

Oil reached an 8-year high above $100, as military tensions in Ukraine escalated. As Russia is one of the world’s major oil producers, sanctions from the West are certainly going to impact business and financial transactions, which may continue tightening the oil supply. Ukraine is also an important transit country for energy commodities like oil and gas, which means that the European distribution will be disrupted by the current situation, as it is almost impossible for the country to keep distributing these commodities to other countries.

But oil isn’t the only commodity to spike, as different food and industrial commodities also increased in value and even hit fresh highs, such as aluminum, wheat and soybeans for instance. The Black Sea region is a big exporting region for many grains, but Western sanctions will definitely disrupt exports.

Final Word

Given the military tensions between Ukraine and Russia, the upcoming sanctions implemented by the world to dissuade Russia from worsening this conflict, as well as higher oil prices, the volatility is expected to remain high over the next few weeks.

In such uncertain times, you need to remember your investment plan before you make a move. Don’t let your emotions drive your decisions. So, always stick to your plan, especially in a market downturn, and keep in mind your financial objectives. Right now, it might be the right time to look at solid financial assets to add to your portfolio that will take advantage of the upcoming market recovery.