It was only a matter of time. Another escalation in the Donbas, another round of reckless accusations from the Kremlin. The latest incident: a strike in Luhansk.
The exact details are still murky, but Russia is already pointing fingers, demanding international condemnation, and, of course, vowing a swift retaliation. For those of us watching the bond markets, the immediate response is predictable: a flight to safety. Gilts ticked up; the rouble, not surprisingly, took a hit.
The FTSE 100 barely flinched, but that’s the City’s way of whistling past a graveyard. We’ve been here before. The market’s cynicism is well earned.
Every new front in this conflict is a fresh headache for portfolio managers already weary of energy volatility and fractured supply chains. The real story here isn’t the strike itself, it’s the reaction function. How will the West respond?
More sanctions? More military aid? Each tit-for-tat exchange erodes whatever fiscal credibility remains.
The Bank of England is already fighting inflation on one front; a new geopolitical shock is the last thing it needs. Investors should brace for a bumpy week. Capital flight from emerging markets is a given.
The only question is whether this will be a blip or a full-blown crisis.
