Any high-profile crisis that takes place somewhere across the globe is very likely to have an impact on financial markets.

The eyes of the world are now on Russia and Ukraine.

Concern is rapidly growing over the humanitarian consequences of the conflict, and potential long-term repercussions. There continues to be huge uncertainty about how the Russia-Ukraine crisis may yet evolve.

At the current time, the range of plausible outcomes is still very wide.

What the conflict may mean for your clients’ investments

We’re aware your clients may want to know more about the possible impact of the crisis on investment markets over the coming weeks and months.

Russia’s attack on Ukraine has had implications for the global economy.

Russia is a major supplier of oil and natural gas, to Europe in particular. European natural gas prices could rise back towards their December 2021 peak, given gas stocks are already very low.

Meanwhile, within hours of the Russian invasion of Ukraine, oil prices jumped to over US$100 and have since shot past US$110. However, the increase may not be long lasting if other large oil producers are able to increase supply.

In addition, as Russia and Ukraine are major producers of metals, such as aluminium and agricultural commodities such as wheat, prices of these are also rising. One consequence of sustained higher prices would be even greater pressure on global inflation, which is already a concern for many countries and will be a concern for your clients.

That, in turn, could put even more pressure on central banks to raise interest rates aggressively.

The coming weeks could see continuing market volatility

Regardless of how the Russia-Ukraine conflict plays out, there may be long-term consequences.

The crisis may hasten a reduction in economic and trade links, known as ‘decoupling’, between Russia and the US. At the same time, the European Union is likely to face intense pressure to reduce its energy dependence on - and cooperation with - Moscow.

Longer term, a more fragmented world would, no doubt, experience more flare-ups of geopolitical tensions, potentially making markets even more turbulent.

The coming weeks therefore could see continuing volatility in worldwide markets.

If and when share prices dip, or perhaps fall significantly, your clients may be tempted to take action to avoid further losses. However history shows that sitting tight and looking to the long term nearly always proves better for investment returns than making knee-jerk reactions to crisis situations.

Past emergencies such as the 2008 financial crisis and the market slump at the start of the 2020 coronavirus pandemic are evidence that share prices tend to recover given time.

At the moment, no one has a clear idea of how the Russia-Ukraine conflict and the humanitarian crisis will pan out.

When it comes to the impact of the conflict on financial markets, encouraging your clients to keep calm and their emotions in check is important.

If you have further questions or concerns about how the current market turbulence may impact your clients’ investments, don’t hesitate to get in touch with your usual abrdn contact.

While all of us are continuing to follow developments closely and hope for a swift resolution to the conflict, great uncertainty remains about the eventual outcome. 

Read abrdn’s position on the conflict in Ukraine.

The value of investments can go down as well as up and your clients could get back less than they paid in.

The views expressed in this blog should not be regarded as financial advice.