The Impact of the Russian-Ukrainian War on Global Financial Markets

Abstract

On February 24, 2022, Russia invaded Ukraine. In this paper, we analyze the response of European and global stock markets alongside a representative sample of commodities. We compare the war response against the recent Covid-19 pandemic and the not-too-distant 2008 global financial crisis. Applying a Markov-switching HAR model on volatility proxies, estimates are made of synchronization, duration and intensity measures for each event. In broad terms, stock markets and commodities respond most rapidly to the Russian invasion; and post-invasion crisis intensity is noticeably smaller compared to either the Covid-19 or the GFC. Wheat and nickel are the most affected commodities due to the prominent exporter status of the two countries.

Keywords: Ukraine war, financial markets, HAR, Markov switching, commodities

JEL Classification: G15, C24