Financial markets have been in a free fall since last night brought reports that Russia has invaded Ukraine. This is hardly surprising, given the severity of the event. It threatens to disrupt entire global industries as the U.S. and U.K. levy sanctions against Russia and threaten even more severe ones. While the S&P 500 fell by as much as 1% today, Europe has shouldered the worst collective declines of the conflict so far. Russian stocks have been falling across the board and show no signs of slowing down.
The crash of Russian stocks today is a reflection of how serious this conflict is. The amounts by which some are plunging call to mind images of the early 2020 crash sparked by the Covid-19 pandemic. For example, the Direxion Daily Russia Bull 2X Shares (NYSEARCA:RUSL), which tracks one of Russia’s largest indexes, has by fallen almost 34%.
Individual Russian stocks aren’t fairing any better, either. Payment service provider Qiwi (NASDAQ:QIWI) is down more than 20%. For many of its peers, the day has been worse. Internet tech company Yandex (NASDAQ:YNDX) has fallen by 40% and Cian (NYSE:CIAN) by 43%. Despite a slight rally, Ozon Holdings (NASDAQ:OZON) also remains in the red by 17% today.
What’s Happening with Russian Stocks
When countries are in conflict with one another and several powers also move to stand against it, it’s expected that markets will fall. Earlier in the month, InvestorPlace contributor Ian Bezek predicted that both QIWI and OZON stock would be severely impacted if the brewing geopolitical tensions sparked something larger. If Russia were to engage in a conflict, Bezek noted, both companies were facing challenges that could easily worsen. It’s safe to say his predictions have proven correct.
Now, a new development poses a fresh threat to many Russian stocks. Specifically, the country is facing the possibility of being ousted from SWIFT, the Society for Worldwide Interbank Financial Telecommunication. This would pose grim consequences for Russian companies like Qiwi, which have a reliance on international banking.
It’s clear that Russia’s economy is facing a crisis that is only going to get worse. Investors must be careful, though, not to underestimate Russian President Vladimir Putin. As Rajan Menon, Director of the Grand Strategy program at Defense Priorities recently laid out, Western sanctions likely “won’t deter Putin.”
What It Means
So far, Putin’s actions have made it clear that he’s willing to forsake Russia’s economy for another cause. Russian companies are at the mercy of a leader whose focus is elsewhere. These stocks are likely to continue falling for as long as the conflict persists.
As of now, the future of the conflict remains uncertain. Much will depend on how nations like the U.S. and U.K. react and how they chose to proceed. For as long as the Russia-Ukraine conflict continues, however, the country’s markets are likely to continue their downward spiral. Investors should not expect Russian stocks to rebound soon.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
