A de facto invasion of Ukraine by Russian forces has ramped up market volatility and sent oil prices to the cusp of $100 per barrel and safe-haven gold to within touching distance of $1,900 an ounce, at the time of writing (22 Feb).

Hopes of a de-escalation are looking increasing forlorn as Vladimir Putin orders troops into Ukrainian regions held by separatist rebels which have been backed by Russia since 2014.

Western intelligence services are warning this is a precursor to a full-scale invasion of Ukraine although second-guessing Putin is something of a fool’s errand at this point.

The imposition of sanctions on Russia, in response to this first step alone, are likely to have a disruptive impact on energy supplies and trade. Germany has said it will effectively cancel the controversial Nord Stream 2 pipeline linking it to Russia.

This could add to inflationary pressures in Europe and might even provide a sufficient economic shock to push the global economy into a downturn.

Russian stocks dropped as much as 14% in response to the latest developments while the rouble also tanked.

UK-listed stocks with exposure to Russia and Ukraine also fell sharply including mining firms Petropavlovsk (POG), Eurasia Mining (EUA:AIM), Evraz (EVR), Ferrexpo (FXPO) and Polymetal (POLY), Russian real estate investor Raven Property (RAV) and investment trust JP Morgan Russian Securities (JRS).

Investment bank Jefferies is relatively sanguine about the wider impact of Russia’s actions at this stage, commenting: ‘Whilst the escalation in tensions is unwelcome, it is unlikely to alter global economic variables that much.

‘It is not easy for Europe politically and economically to enforce punitive sanctions. It is unclear whether a limited incursion into Eastern Ukraine will force the western nations to adopt the more draconian sanctions being earlier voiced.

‘The most contentious and one that the Russian president might have miscalculated is on Nord Stream 2 – the 760-mile pipeline under the Baltic Sea – designed to double Russia’s natural gas exports to Germany.’

If Russia were to make moves on Kyiv, it is very difficult to work out what might come next. Would the US opt for a direct military intervention, for example?

There is speculation Putin had explicitly agreed with close ally, Chinese leader Xi Jinping, to delay any action in Ukraine until the conclusion of the Winter Olympics in Beijing.

And while there is less noise around the issue right now, with focus unsurprisingly concentrated on Eastern Europe, Jinping has his own territorial ambitions.

Retaking Taiwan, last held by China more than a century ago before it was ceded to Japan, is seen as a key goal and would represent arguably an even bigger threat to global geopolitical, economic and market stability.

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