As the years-long Russia-Ukraine war escalates, experts say some key components of the modern economy may be at risk, and markets are still assessing what the conflict might bring.
On Sunday, President Biden authorized Ukraine to use U.S.-made long-range missiles to strike deep into Russian territory, a move reversed by the administration just two months before leaving office. There is a flip mark. Russia’s Defense Ministry said Ukraine immediately seized new authorization to attack a facility in the Bryansk region on Tuesday using US-made missiles. In response, Russian President Vladimir Putin lowered the country’s limit on the use of nuclear weapons, a clear warning to the West.
Because of the increased aggression, all three major indexes fell early Tuesday, with the Dow down nearly 450 points and the S&P 500 down 0.5% shortly after the market opened. Still, by the end of the day, markets were mixed, with the Nasdaq rising 1%, driven in part by Nvidia’s earnings, and the S&P advancing 0.3%. Meanwhile, the Dow fell about 0.3%, or 120.66 points.
Uncertainty over Russia’s response to the latest strike in Ukraine was fueling the market, said economist Alexander Tomic, associate dean for strategy, innovation and technology at Boston College’s Woods College of Advanced Studies. good luck.
Stocks have rallied in recent weeks since President-elect Donald Trump won the White House, with some recent volatility, and geopolitical issues adding to the uncertainty, Tomic said.
“The Ukrainians did what they did, now the question is what do the Russians do to retaliate,” Tomic said. “And I think what it is, no one knows, it creates uncertainty, and then the markets react to the uncertainty.”
Another way the escalating conflict in Ukraine could affect markets is through threats to the natural resources that make semiconductors, which are already in short supply, said Usha Haley, an international business professor at Wichita State University. . Key components for semiconductors, such as palladium and neon, are found either in Russia or Ukraine, Haley said. good luck.
“Semiconductors are central to many U.S. industries, so these shortages and resulting production delays will likely have broad economic impacts through supply chains and lead to further inflation,” Haley said.
Still, Tomic said the risk of the Russia-Ukraine war having a major impact on markets is likely high because investors have already priced in the risks of the nearly four-year-old conflict. Tomic said Trump’s proposed tariffs have a greater impact on other geopolitical concerns, such as imported foreign products.
“I don’t expect that. [conflict] A big driver for any kind of market activity would be, besides, Russia launching that housing for Germany, or something stupid like that. Then, of course, it would be a whole new reality.
Still, due in part to geopolitical instability and the threat of a rebound in tariffs and inflation, gold rose 0.6 percent while bitcoin hit a high of $94,000 before pulling back.
Tomic said that with Tuesday’s attacks, Ukraine is trying to gain leverage ahead of any potential policy changes Trump may make regarding Ukraine in January. Trump has previously said that he could end the Russia-Ukraine war in 24 hours.
Earlier this month, a former adviser to the president-elect said Trump would prefer ending the conflict over reclaiming Russian-held territories such as Crimea for Ukraine, the BBC reported. On the prediction market Polymarket, which predicted a Trump election victory, his chances of ending the war in Ukraine in the first 90 days were at 38 percent as of Tuesday.
While the dispute may not have a major impact on US markets, the story in Europe may be different. German Foreign Minister Annalina Berbock said on Tuesday that the country would not be intimidated by Putin’s lowering of Russia’s nuclear range.
Nevertheless, because of their proximity to conflict, countries such as Germany may be more vulnerable to escalation, especially if nuclear weapons are involved. In part because of the threat, indexes in Germany, France and Spain all closed down more than 0.5 percent on Tuesday.
In a worst-case scenario, Putin could escalate the conflict to Poland or Germany and enlist NATO in a cyberattack on the United States, Tomic said.
“The question is what are they actually capable of,” he said.
