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Impact Ukraine – Russia conflict on financial markets

25 February 2022
The further impact of the conflict on the economy and financial markets depends very much on its scale and duration, as well as the sanction measures that will be taken on both sides.
Please find attached an update on the markets situation, and our analysis of the expected impact on economic growth and inflation, looking in particular at two scenarios where the crisis has a moderate impact and a severe impact on markets.

In brief

  • Impact on commodities: tensions result in higher energy prices. In our two scenarios for further escalation, the degree of sanctioning and countermeasures is decisive.
  • Economic impact: the Ukraine conflict affects the European economy through trade relations, banking exposure, financial conditions and economic uncertainty. The greatest impact comes from rising energy prices as well as all of these factors.
  • Impact on trade and banking relationship: the trade relationship with Russia is limited for the European Union, as is the exposure of European banks (this has halved over the last 10 years as a percentage of total assets).

Lessons from history

History shows us that the initial market reaction to geopolitical crises is typically fierce but is often relatively short-lived. After the initial shock has passed, longer-term economic fundamentals usually prevail.

Long-term vision

We remain positive on the economic cycle. The reopening of global economies provides a tailwind and we do not expect a recession. Geopolitical events such as this rarely have a long-lasting effect. Ultimately, it is economic and business performance that is the deciding factor, and these remain solid for the moment.

Read our full update on the Ukraine – Russia crisis



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