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Will Russia-Ukraine Tensions Cause a Market Crash? 3 Experts Weigh In.

The Russia-Ukraine conflict continues to grow some prickly thorns. It seems the whole world has their eyes on eastern Europe as Russia continues to militarize its borders. This morning, President Joe Biden stated there is “every indicat…

The Russia-Ukraine conflict continues to grow some prickly thorns. It seems the whole world has their eyes on eastern Europe as Russia continues to militarize its borders. This morning, President Joe Biden stated there is “every indication” that Russia will attack Ukraine within the next several days. Market experts have forewarned that the conflict could have ripple effects in economies across the world. One such concern is the possibility of a U.S. market crash in response to the conflict.

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So, will Russia-Ukraine tensions cause an an economic downturn? Well, it’s hard to say. This morning, U.S. Secretary of State Antony Blinken commented on the looming conflict:

“The most immediate threat to peace and security is Russia’s looming aggression against Ukraine. The stakes go far beyond Ukraine. This is a moment of peril for the lives and safety of millions of people as well as for the foundation of the United Nations charter and the rules-based international order that preserves stability worldwide.”

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In an increasingly interconnected society, geopolitical tensions on the other side of the ocean frequently have consequences worldwide. This has resulted in doomsday theories of a U.S. market crash in response to the Russian crisis.

Markets in general turn increasingly volatile in times of uncertainty. Investor sentiment has been increasingly unclear regardless of what’s happening in Russia. With inflation reaching near 40-year highs, worries over mounting interest rate hikes, and general fears of a pullback following last year’s red-hot growth, this latest conflict could be the straw that breaks the camel’s back. At least, that’s what some investors believe.

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All 11 sectors of the S&P 500 are in the red today amid growing concerns over a conflict at the Russia-Ukraine border. Therefore, let’s see what the experts think about a potential market crash.

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Analysts Share Thoughts on Potential Stock Market Crash

As per historical precedent, a war across the ocean could have implications for U.S. markets. Russia is the second-largest producer of natural gas globally. As per JPMorgan strategist David Kelly, a conflict of this kind could mean supply hiccups and rising European natural gas prices. This could have a cascading effect that could raise the price of oil and further elevate inflation. As Kelly explains,

“Any disruptions to oil flows from Russia in a context of low spare capacity in other regions could easily send oil prices to $120 bbl. A halving of Russian oil exports would likely push the Brent oil price to $150 bbl.”

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Truist Advisory Services investment officer Keith Lerner expects a tempered reaction to the potential war. Citing comparable historical events, including the 2003 Iraq War and 1962 Cuban missile crisis, Lerner expects a mostly short-term impact:

“When you look at the history of geopolitical events, they tend to have a short-term impact on the markets, and as long as they don’t drive you into recession, then the markets tend to rebound. … The conclusion is that we don’t think investors should overreact to this situation by itself.”

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On Monday, Capital Economics analysts commented on the situation in Russia. The analysts mainly highlighted the sometimes indirect effects such a conflict could manifest, particularly added inflation pressure. As such, the analysts claim sanctions or other consequences from the conflict could add nearly two percentage points to inflation in developed markets, especially in Europe. “Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more aggressively as a result.”

It’s unclear what path the current Russia-Ukraine conflict will take. However, markets and major economies everywhere will likely keep a laser focus on the situation as it unfolds.

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On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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