The US main stock indices, the Dow Jones, the NASDAQ, and the S&P 500, closed in the red yesterday. However, their decline was rather moderate. The equity market has been dropping for more than a week with the NASDAQ Composite hitting an 8-month low. Currently, stocks are facing hard times. Analysts believe that Wall Street will be turbulent throughout 2022. Earlier, rates hikes were the main bearish factor by the Fed this year. Now, there are geopolitical risks.
There are now more than 150,000 troops placed at different points along the Ukrainian border. Some analysts reckon that Russia may start invasion at any moment. However, Moscow denies such claims. Kyiv did not accept Russia's security demands. So, the likelihood of escalation of the geopolitical conflict is growing. Moscow recognized the independence of the Luhansk and Donetsk regions. Heads of these republics stated that they see their borders as the borders of the Luhansk and Donetsk regions. Since the Russian troops have already entered Donbas, they may soon begin to fight back to restore peace in these regions. Vladimir Putin more than once said that in order to de-escalate the conflict, Kyiv should not join NATO military alliance, recognize Crimea as part of Russia, and also stop accepting arms supplies from Western partners. Ukraine turned down the ultimatum, so a military conflict is almost inevitable. The only question is when it will start and how long it will last.
The US and EU imposed new sanctions against these republics, several Russian banks, and Russian politicians and businessmen the day after the recognition of the independence of the LPR and the DPR by Moscow. Notably, these regions are unrecognized by other world states. German Chancellor Olaf Stolz said that the certification of the Nord Stream-2 gas pipeline had been suspended. Joe Biden hinted that Nord Stream 2 would not be launched. Prime Minister Boris Johnson pledged to impose tough sanctions against Russia. "Clearly, it's time to bring in some tough sanctions against the Russian regime, against big Russian companies — organizations of strategic importance. And also making sure that we stop the raising of funds by Russian companies on London financial markets," Johnson said. Almost all states condemned the recognition of these regions. Therefore, it is not surprising that the conflict is escalating further. The diplomatic resolution seems unlikely now. The Russian ruble and the stock market have dropped sharply as well as many risky assets such as cryptocurrencies or US stocks. Investors usually get rid of risky assets in times of market doldrums.
