Last month finished with the sound of conflict on the edge of Europe, as the West stepped up its efforts to punish Moscow for starting the region’s biggest military offensive since 1945. International rules and systems have seemingly been ripped up with Russian forces attempting to take over a sovereign nation. Marching into the new month with a market recap of the whirlwind February we’ve had, both in the financial markets and on the geopolitical front.

Financial markets were initially caught off guard, with little risk premium priced in for a full-scale invasion. The dollar assumed safe haven status along with the yen and CHF, while oil and gold spiked higher. Now, every hour is characterised by heightened volatility and huge sensitivity to headlines and rumours out of the Ukrainian war zone.

Of course, trading in this environment is treacherous but we need to try and look beyond the fog and noise of war. For investors, a pattern of past geopolitical crises is that ultimately, the underlying context tends to dominate. Sell-offs are relatively shallow in equity markets (6-8% on average) and short (three weeks to trough, and then to recovery).

The strength of sanctions is now key. Price pressures are set to increase further as supply chains are stretched even more. Commodity supplies will be hit in already tight markets. Europe’s exposure to Russian oil and gas supplies perhaps represents the ultimate weapon for both sides. In short, deeper restrictions harm Russia and the West too. Policymakers will be weighing up the upside risks to inflation against the downside risks to activity.

Major events of the month, in numbers

USDRUB -30%: The plunge in the value of Russian assets has been swift as the West embarks on an economic war versus the Kremlin. The prime example of this is in the rouble which dropped as much as 30% in offshore trading at the start of this week. The freezing of the Russian central bank’s assets is unprecedented and cuts it off from accessing its EUR and USD reserves which it has built up over the last few years. But this may have severe consequences on trade and sectors which aren’t being sanctioned. USD/RUB is the barometer of the pressure on Russia’s finances and economy.

$105.74 Brent Crude: Oil prices surged initially above $100 for the first time since 2014 on news of the Russian invasion. Softer, and then stronger sanctions have seen prices trade around this key psychological level. All eyes will turn to the OPEC+ meeting this week who will discuss their output policy for April. The US and allies may put pressure on the group to increase production more than the agreed 400k barrels, as rising prices feed into ever higher CPI data. The Iranian nuclear deal may offer some relief to the market as well.

$1,974 Gold: The classic hedge in times of stress and geopolitical tensions hit 17-month highs last week. Prices had risen from below $1,800 at the start of the month with the $1,877 barrier beaten conclusively on safe haven buying in the middle of February. But the precious metal is trading back below a zone of resistance from $1,916 to $1,923. Stagflation fears should underpin support while ETF inflows have also been picking up.

2% US 10-year Treasury yield: The underlying narrative to markets this year has been rising inflation and rising interest rates. Bonds have been sold aggressively with markets pricing in more than six rate hikes by the Fed this year and the chance of a 50bp move at its March meeting, though this has now been cut to only around 14%. Last week’s PCE index beat expectations while the yield curve itself has been flattening as the market warns of a policy error.

-22.89% Facebook: Lest we forget, the megacaps among the tech-laden Nasdaq index have been suffering this year with the index at one point in a bear market down 20% from its record November high. Facebook plunged after it posted its earnings, losing over $250 billion of its value in the biggest one-day crash in history. Is this the beginning of the end or there are hopes that Meta has kitchen-sinked the outlook, as its user growth falls?