The repercussions of Russia’s invasion of Crimea are starting to shake the foundations of the financial world.
The Russian market tumbled 12% and the shockwaves were felt around the world as the FTSE 100 dropped 1.6% to 6,700 and the Dow Jones opened 0.9% lower.
Investors put their risky tendencies to one side before hearing what action will be taken by foreign governments to prevent a possible war between Russia and the Ukraine, which has mobilised forces to deal with Russian troops.
Though no shots have been fired, Russian President Vladimir Putin’s move into the Russian-speaking part of Ukraine, where it has a naval base, has been denounced by western governments as a “violation of Ukraine's sovereignty”.
“While conflict remains the least likely course of action, political jawboning has kept markets on edge with the Ukrainian Prime Minister saying it “will never give up” Crimea,” said CMC Markets’ chief market analyst Michael Hewson.
“Given that the Russians are already there, and entrenched, it is very difficult to imagine a scenario that could compel them to leave barring a start to some form of hostilities.”
US Secretary of State John Kerry has already warned that American businesses may “pull back” from Russia, with trade sanctions and boycotts top of the list of options for the West’s superpowers looking to prevent a war.
Such moves could have a profound impact on a number of London-listed companies that do business in Russia.
Shares in ITE Group (LON:ITE), for example, which organises exhibitions and conferences mainly in Russia, tanked 13% on fears international companies will not be as keen to attend its events.
The group, which generates 65% of its profits in Russia and 8% from Ukraine, was downgraded by Canaccord Genuity from ‘buy’ to ‘hold’ as a result.
Sanctions could also stall the UK floats of several Russian companies, which had been tipped to list in London.
Among them are the Credit Bank of Moscow, children’s goods retailer Detsky Mir and the Russian arm of German retailer Metro.
Russian hypermarket chain Lenta, which managed to complete its London IPO on Monday, fell 13% as its debut proved untimely.
Elsewhere today, Ferrexpo (LON:FXPO), which produces iron ore pellets in Ukraine, slumped 8%, while Russian steelmaker Evraz (LON:EVR) lost 11% of its value.
Petropavlovsk (LON:POG) and Polymetal (LON:POLY) tumbled 10% and 8% each.
Both missed out on the gold rush enjoyed by other producers of the precious yellow metal as gold’s safe haven appeal returned. Randgold Resources (LON:RRS) topped the FTSE 100, up 4.6%, followed higher by gold and silver miner Fresnillo (LON:FRES).
Fears of gas supply disruption lifted oil prices, helping BG Group (LON:BG.) higher this morning before it beat a retreat, as well as putting pressure on airline shares IAG (LON:IAG), which owns British Airways, and easyJet (LON:EZJ) on the prospect of higher fuel costs.