February 24th, 2022 marked a dark day for the world. People went to sleep, only to wake up to the news of Russia invading Ukraine. The invasion wasn’t unexpected, considering tensions had been brewing between the two countries for decades. Ukraine was initially part of the USSR until its disbandment in 1991. Ukraine would eventually become an independent state separate from Russia. Turmoil continued over the past three decades. For instance, Russian leader Vladimir Putin ordered his troops to invade Crimea in March 2014 - an event that has now been forgotten by many.
While that conflict wasn’t unexpected, most experts didn’t anticipate it would have the long-term knock-on effects that the world’s experiencing today. The Ukrainian invasion, for instance, skyrocketed oil prices worldwide as oil distribution and production were impacted. Supply chain disruptions also caused significant problems. Then, there was the wheat problem. Ukraine and Russia have historically been considered the bread baskets of Europe. The former exports over 45 million tonnes of wheat annually. Meanwhile, Russia is the single largest wheat exporter in the world.
Unfortunately, war takes a toll on everyone because it yields no winners. Stock markets soon faced the wrath of war as they plummeted globally. Immediately following the invasion, NASDAQ experienced a twenty percent decline, flirting dangerously close to bear market territory. Other stock markets like Europe’s STOXX 600 didn’t fare much better. Likewise, Russia’s MOEX stock exchange also slumped a record 33 percent, leading analysts to predict it was one of the three largest stock market crashes of all time.
The Impact of the Ukrainian Conflict on Global Stock Markets
Few US-listed stocks were affected directly by the Russian and Ukrainian conflict because they had significant exposure in these markets. However, they weren’t the only ones affected. Meanwhile, the conflict also affected other companies like McDonald’s, Starbucks, Exxon, and Netflix because these companies shut down operations in Russian territories following the invasion.
These companies witnessed stock prices decline because they lost a significant consumer base in Russia.
Research from JP Morgan also shows that the Ukrainian conflict has indirectly impacted US-listed organizations, resulting in severe implications. While most US-based companies don’t have direct exposure to Russia, the Russian-Ukrainian conflict’s impact on supply chain distortions and oil prices will lead to increased inflation, dampening investor sentiment.
This implication is evident in how the stock market has performed in 2022. Most indexes have witnessed double-digit declines. The NASDAQ Composite, for instance, declined by 32 percent, while the SP 500 plummeted by 23 percent. Most investors and traders often like to hold blue-chip stocks in their portfolios. However, the reality is these blue-chip stocks have also not been safe from the implications of the Ukrainian conflict, declining by 18 percent so far.
Skyrocketing oil prices have dented companies’ earnings because of increased costs. As a result, many organizations have reported lower profit and revenue margins than in previous years. Many experts now speculate that the market is headed to a recession, particularly since the Federal Reserve increased interest rates twice within one quarter to combat rising inflation.
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