How Latest Geopolitical Tensions Impacted Financial Markets

Tensions are escalating in Eastern Europe as several reports refer to potential invasion of Ukraine. The crisis brought about several important developments that, in effect, throw heavy shadows on the financial markets, and, in turn, impact price movements as well as igniting concerns on oil supply disruption.

The new developments include an US refusal to prevent Ukraine from joining the North Atlantic Treaty Organization (NATO), which is one of the most important demands announced by President Vladimir Putin earlier.

The Ukrainian Foreign Ministry also supported the American rejection of Putin’s demand, which reflects the extent of compatibility between the policy of this eastern European country with the policies of the White House and its approach in the region.

The United States rejected a Russian demand previously announced by President Vladimir Putin to prevent Ukraine from joining the NATO. Anthony Blinken, the US Secretary of State, said that this refusal comes within the framework of an official response to Putin’s earlier demands to resolve the crisis in the region.

Although he has shown no willingness on the part of the United States to make concessions, Blinken said, “We are offering a serious diplomatic path if Russia chooses it.”

Blinken hesitantly denied reports of divisions among NATO members over the official collective stance on the crisis in Eastern Europe, saying: “NATO has prepared its proposals that fully reinforce our ideas and are also reinforced by our proposals.”

On the other hand, Russian Foreign Minister Sergei Lavrov said: “It (the US response) gives us hope for the beginning of serious talks on some secondary issues”. Meanwhile, Dmitry Peskov, spokesman of President Putin, told the media: “We have not been in a hurry to assess the American response, and we need time to analyze it”.

The second demand included providing legal guarantees that the NATO would not expand to the east of Europe, a demand that was practically rejected by the White House continuing to speak on the behalf of Ukraine in crisis.

The third Russian demand includes that NATO countries stop sending military aid to Ukraine. But it is likely that the alliance did not respond to this, as member states of the alliance continue to send military aid and forces in preparation for the defense of Ukraine from any possible Russian attack or invasion.

Other developments
The US Pentagon said that Russia was continuing to build more troops on its borders, including Ukraine, until “the past 24 hours”. “We continue to monitor the build-up of more Russian combat forces, including over the past 24 hours, in western Russia and parts of Belarus,” the Pentagon added.

European Commission President Ursula van der Leyen said “all options are on the table” regarding economic sanctions that could be imposed on Russia if it invades Ukraine. “I will be very clear, if nothing is off the table, and the commission is responsible for designing, shaping, and developing sanctions,” she added.

Turkish President Recep Tayyip Erdogan also offered to play mediation role between Russia and Ukraine as part of international efforts to defuse the crisis. Putin’s spokesman, Dmitry Peskov, announced that the Russian president will visit Turkey for the annual talks between the two countries with his Russian counterpart Erdogan.

In a TV interview, Erdogan had invited the Russian president to attend the annual talks between the two countries within the framework of the work of the High-level Strategic Cooperation Council and the mechanisms in Turkey.

Market Reactions
The sharp negative impact of the Russian-Ukrainian crisis on global financial markets declined somewhat on Thursday, after it pushed negativity to dominate the markets on the first and second trading days of this week.

But the prior impact has not disappeared altogether, turning into a positive effect on global oil prices, which often benefit from geopolitical tensions.

Global crude oil prices ended their trading in an upward trend with a batch of developments in the tensions between Russia and Ukraine after the announcement of the United States’ rejection of the Russian demand to prevent Ukraine from joining the North Atlantic Treaty Organization (NATO).

Crude Oil futures surged to $87.26 per barrel, compared to the last daily closing at $87.15 per barrel.