Rising tension between Russia and Ukraine in what the West fears could lead to a big war is signaling investors across Russian, Ukrainian, and broader global markets to brace for impact. The looming threat of war has already led to the depreciation of the countries’ assets by billions, but the recent escalation could cause something much worse.

In a televised address, Vladimir Putin recognized Donetsk and Luhansk regions in eastern Ukraine as independent bodies and expressed Ukraine as an integral part of Russia’s history.

It is worth noting that Russian markets were still open when Putin made his decision live on television following phone calls to the German and France leaders. Soon after, losses reached 3.3% whereas Moscow’s stock market hit its lowest in over a year. The dollar-denominated RTS index closed 13.2% lower and the rouble-based MOEX Russian index lost 10.5%.

Analysts at Commonwealth Bank of Australia cautioned traders ahead of the start of Tuesday's Asian open. They said that financial market participants are now waiting for a response from the U.S. and Europe which is expected to come as tough new sanctions.

One of the most severe measures that could come into effect would be cutting ties of Russia’s banks from the SWIFT banking systems and a total ban on the U.K, EU, and U.S. investments funds holding Russian government bonds.

The impact is likely to be felt on a global scale in addition to the already intensifying pressure of rapidly increasing global borrowing costs this year, said analysts. Future markets are estimating a 1.8% decline on the S&P 500 on Wall Street, a 2.5% fall on the Nasdaq, a 2.2% drop on Japan’s Nikkei, and 3.7% plunge on Germany’s DAX in Europe.

Moreover, U.S. treasuries are also rallying for traditional safe assets, cited sources close to the matter.

Source credits: https://economictimes.indiatimes.com/markets/stocks/news/markets-brace-for-heavy-falls-as-russia-ukraine-crisis-escalates/articleshow/89736838.cms