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Financial Market Reactions to the Russian Invasion of Ukraine

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Abstract
This article analyzes financial market reactions to the Russia-Ukraine war with a focus on the opening weeks. Markets did not completely anticipate the war, and asset price reactions strengthened from the first week—when there were hopes for a quick resolution—to the second week, when prices generally peaked and began to partially revert to prewar values. Exposure to commodity trade and trade with Russia and Ukraine determined market perceptions of the riskiness of equity and foreign exchange assets. Credit default swap prices on sovereign debt and breakeven inflation rates indicate that markets saw the war as a measurable fiscal risk even for nonbelligerents.

Suggested Citation

  • Christopher J. Neely, 2022. "Financial Market Reactions to the Russian Invasion of Ukraine," Review, Federal Reserve Bank of St. Louis, vol. 104(4), pages 266-296, October.
    • Handle: RePEc:fip:fedlrv:94966
    DOI: 10.20955/r.104.266-96
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    References listed on IDEAS

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    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
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    5. Christopher J. Neely, 1999. "An introduction to capital controls," Review, Federal Reserve Bank of St. Louis, vol. 81(Nov), pages 13-30.
    6. Christopher J. Neely, 2022. "The Russian Invasion, Oil and Gasoline Prices, and Recession," Economic Synopses, Federal Reserve Bank of St. Louis, issue 10, pages 1-2, April.
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    Cited by:

    1. Nicole Branger & Michael Hanke & Alex Weissensteiner, 2024. "The information content of wheat derivatives regarding the Ukrainian war," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(3), pages 420-431, March.
    2. Hu, Yang & Lang, Chunlin & Corbet, Shaen & Hou, Yang (Greg) & Oxley, Les, 2023. "Exploring the dynamic behaviour of commodity market tail risk connectedness during the negative WTI pricing event," Energy Economics, Elsevier, vol. 125(C).
    3. Xu, Danyang & Hu, Yang & Corbet, Shaen & Hou, Yang (Greg) & Oxley, Les, 2024. "Green bonds and traditional and emerging investments: Understanding connectedness during crises," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).

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    More about this item

    Keywords

    financial markets; Russia; Ukraine; Russian invasion of Ukraine;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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