As 24 February marks one year since Russia invaded Ukraine, a research project by the University of Westminster, University of Kent, Lancaster University, Queen Mary University of London and SOAS University of London has found that financial markets reacted more rapidly to the outbreak of the war between Ukraine and Russia than to the COVID-19 pandemic and global financial crisis in 2008. This reaction may show that the markets perceived the war as the biggest threat from the three events.
However, the intensity of reaction to the war was more muted suggesting that investors expected the war to conclude quickly and not affect investors in the long run.
The commodities markets painted a different picture with a high intensity reaction especially in terms of wheat and nickel, due to Ukraine and Russia being prominent exporters. Ukrainian wheat exports account for nearly 10% of global exports, while Russia accounts for 20% of high-grade nickel used in battery construction. The findings reveal strong ongoing pressures on the economy through these commodities given their strategic importance.
Dr Sheeja Sivaprasad, Principal Lecturer in Finance at the University of Westminster, said: “Our findings don’t only make it evident that wars may be seen by financial markets as the most threatening, we also see that the resulting turbulent commodity markets and inflationary pressures may plunge global economies into recession.
“The long-term global financial consequences of the war in Ukraine will depend on policy responses and priorities set today. International cooperation is a must. Decision-makers in the UK and around the world need to act collectively and quickly, if they were to contain any further global economic shocks and subsequent spiralling inflation.”
The findings of the research project titled The Impact of the Russian-Ukrainian War on Global Financial Markets has been published in the journal International Review of Financial Analysis.
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