Russia-Ukraine tensions: Asset market scenarios

Despite tensions continuing to ratchet higher, on a medium term view we think the balance of probabilities implies a buying opportunity for affected asset markets, regional and global. However, should Russia make an incursion into Ukraine beyond the currently disputed areas in eastern Ukraine, this would have significant implications for asset prices and volatility in the near-term.

What you will learn:

• We expect the RUB would weaken significantly in a tail risk scenario, as the market would test the 2015 high of 83, and then beyond.
• Russian equities would also suffer, but OFZ bonds would be relatively ring-fenced, owing to global investors’ low positioning.
• Eurozone equities would also see modest downside in this scenario as higher gas prices weigh on growth and squeeze profit margins.