HONG KONG: Oil and safe-haven assets rallied as Asian markets tumbled on Tuesday after Russia’s Vladimir Putin ordered troops into two separatist regions in eastern Ukraine, heightening geopolitical tensions and fears of conflict.
Investors were sent on the run after Putin recognized the independence of two rebel-held areas of Donetsk and Luhansk and sent “peacekeeping” troops.
The move comes just hours after the Kremlin appeared to throw cold water on a potential summit with Joe Biden and lead to condemnation from world leaders and warnings of a slew of sanctions for Moscow.
Biden, France’s Emmanuel Macron and German Chancellor Olaf Schultz warned that Moscow’s strategy “will not go unresponsive.”
The White House said the president would issue an executive order “to bar Americans from new investment, trade and financing in these two insurgent territories.”
A French presidential official said the EU was preparing a list of Russian entities and individuals to respond “proportionately” to the recognition.
The prospect of war and harsh sanctions has triggered supplies of a range of commodities in the region, including oil, wheat and nickel.
Crude prices, already up more than 20% this year on surging demand, continued to rise on Tuesday, with Brent closing at the $100 mark for the first time since 2014.
Hopes of the Iran nuclear deal, which could see Tehran resume global oil exports, cannot moderate gains.
Rising oil prices have added to concerns about global inflation, with the Federal Reserve under intense pressure to tighten monetary policy to prevent prices from spiraling out of control.
That, in turn, has hammered equities in recent months, while the latest developments in Europe have led to another massive sell-off in Asia.
Tokyo and Hong Kong both fell more than 2%, while Shanghai, Sydney, Seoul, Taipei and Bangkok all fell more than 1%.
Singapore, Manila, Jakarta and Wellington also posted losses.
“It’s a fluid situation in the evolving geopolitical thematic we see before us,” Chris Weston, of Pepperstone Financial Pty, said.
“Traders are currently playing defence as lower liquidity, driven by the US Presidents Day holiday, (exacerbates) moves.”
The uncertainty on trading floors was also pushing safe havens higher, with gold climbing past $1,900 and heading for a one-year high, while the yen was also stronger against the dollar.
The greenback was sharply higher against other currencies, however, including a four percent gain on the ruble. The Russian unit’s drop came as the country’s MOEX index plunged 10 percent.
And commentators warn of further pain if Putin presses ahead with an invasion of Ukraine.
“Uncertainty still rules,” Cristian Maggio, at TD Securities, said before Putin’s recognition of the rebel regions. “In the case of armed conflict, Russian assets will weaken substantially more than now.”