The worst-case scenario, that of the Russian invasion of Ukraine, was a shock to the stock and oil markets.
The Russian invasion is the worst-case scenario the markets have ever considered. An additional drop of 5% to 10%, would bring the major international markets close to a total drop of 20% or in a bear market area. The Nasdaq index, in Thursday’s session, temporarily entered a bear market to then recover.
The “shock of the war” has clouded the outlook for the global economy, but also for the markets, at a time when inflation was prevailing and central banks were planning to gradually withdraw stimulus measures and raise interest rates.
Although it is impossible to determine the exact time and magnitude of the geopolitical impact on the markets, such events generally did not prevent stocks from moving higher in the medium term and corrections due to geopolitical events are usually short-lived, according to stock history.
But according to Peter Oppenheimer, Goldman Sachs’s head of international market strategy, the blow to the stock market from Russia’s invasion of Ukraine will be greater than the effects of the 2014 annexation of Crimea.
In the Crimean crisis in 2014, Russian markets were “sold out” in the short term, but the impact on the eurozone was minimal
But the current crisis between Russia and Ukraine could have a catalytic effect on the European economy.
UBS estimates that if the conflict escalates to a level that will push Western nations to accept Russia’s power outage, and if oil prices rise to $ 125 a barrel or higher in two quarters, it will result in about $ 0. , 5% lower global GDP growth and higher inflation, affecting consumer power. If Russia’s energy flow is disrupted, higher risk premiums and lower global earnings estimates are likely to cause more long-term losses for stock markets.
Goldman Sachs assesses the war in Ukraine and estimates that Europe is more vulnerable than the US, in this context of geopolitical tension.
Russia-Ukraine tensions have pushed the Fed’s geopolitical risk index to a very high level, but any immediate impact on the US economy should be limited, as trade ties are weak and energy prices are likely to be affected much less. US than in Europe notes the American investment bank.
However, before the Russian invasion of Ukraine, the American bank JP Morgan estimated that the shares had already assessed the risks and considered the impact of a conflict in Ukraine small and short-lived.
According to a poll of its clients, although 83% believed that a military conflict in Ukraine would cause a sell-off in global stock markets, the majority expected the impact to be moderate and to be overcome.
Russia’s invasion of Ukraine, which is causing a spike in energy prices, comes at a time when inflation is “showing its teeth” with interest rate hikes set by central banks and the threat of a recession in the global economy being visible, according to estimates. more cautious analysts.
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