Financial markets seem to be entering the apogee of fear after the escalation of the conflict in Ukraine. Russia in practice takes control over two republics that have the largest deposits of raw materials. The US announces sanctions against Russia.
The anxiety apparently seems to be imprinting itself on the stock market, where losses can be recorded by stock indices, while investors can potentially benefit from declines in stock prices.
One move wiped out the entire DAX gain of the past year
Aside from Russia's MOEX index, which was losing nearly 4 percent at the start of the session, one of the more notable reactions may involve the DAX. The German stock exchange's main index was already able to drop below potential key support in the 14800 point area and quickly reached its lowest levels since March 2021 this morning. It can be said that with this move it almost erased all potential gains of the last year.
The indices in the United States may look no less interesting. The Nasdaq 100 contract seems to still be testing the vicinity of the late January minimum at 13700 points. This comes after Russian President Vladimir Putin recognized two self-proclaimed separatist republics in Ukraine and ordered troops to enter these regions, and the United States is expected to announce further sanctions against Russia.
Sanctions with a ricochet? Oil, gas, gold are getting more expensive
Any sanctions against Russia may affect the market of energy resources. Already today, the price of Brent crude oil has approached USD 100 per barrel, hitting 7-year highs. Gas prices in Europe also seem to be rising, and this could perpetuate inflation.
Inflation with sanctions can in turn lead to the worst state of the economy, stagflation. This is a period of high prices and weak economic growth, economically devastating businesses and households.
A quick agreement between the US and Iran may be a mitigating factor for the price rise. Oil market analysts indicate that the potential agreement could translate into an increase in supply by 1 million barrels per day of Iranian oil.
Gold is also getting more expensive: this morning we had to pay over USD 1900 per ounce. This may mean that investors are trying to hedge against geopolitical and inflationary risks by investing capital in gold bullion.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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