Financial Market Reactions to the Russian Invasion of Ukraine

This article analyzes financial market reactions to the Russia-Ukraine war with a focus on the opening weeks. Markets did not completely anticipate the war, and asset price reactions strengthened from the first week—when there were hopes for a quick resolution—to the second week, when prices generally peaked and began to partially revert to prewar values. Exposure to commodity trade and trade with Russia and Ukraine determined market perceptions of the riskiness of equity and foreign exchange assets. Credit default swap prices on sovereign debt and breakeven inflation rates indicate that markets saw the war as a measurable fiscal risk even for nonbelligerents