Ukraine Update 24 January, 2022: Pieces of the Puzzle

The fact Russia is serious about Ukraine appears to finally be kicking in for NATO, the EU and Western governments. Whether this will end up being a matter of ‘too little, too late’ remains to be seen. But for the moment, there are at least some decisions being made in Western capitals which will lead to prudent action in the near future. The Western media is also coming around to the idea that all of this might very well be real. The media is almost always at least 48 hours behind events though, and we’re seeing that in their reporting today.

-Wall Street is responding negatively to the worsening situation in Europe. The Dow Jones Industrial Average cratered this morning, dropping more than 1,000 points.  The immediate reason for the drop was news that President Biden will be holding a video call with European leaders this afternoon to discuss Ukraine and Russia’s growing military buildup. There are other factors contributing to the Dow’s slide into correction territory, however, the realization that the Ukraine crisis is worsening appears to be the catalyst.  

-The US is moving ahead with plans to withdraw dependents of embassy staff from Ukraine starting this week. The plan was announced on Friday but did not garner much media coverage until the official authorization was given. Apparently, the US State Department has also decided to remove non-essential staff from the Kiev embassy as well.  Great Britain has also announced the planned withdrawal of family members of diplomats and other embassy staff. London has also indicated it will be reducing its embassy staff in Kiev along lines similar to what the US is doing with its people. The European Union, on the other hand, will not evacuate its diplomats from Ukraine for the moment.

-NATO is starting to reinforce its Eastern Flank, albeit in limited fashion. A number of alliance members have pledged to deploy additional fighter aircraft and warships to the region in the near future. Denmark is sending four F-16s to bolster the Baltic Air Policing mission in Lithuania as well as a frigate to the eastern Baltic Sea. The Netherlands has pledged two F-35s for Bulgarian air policing duties, yet they will not arrive until April. Spain, we discussed last week, has committed two warships and possibly fighter aircraft to Bulgaria. France has revealed it is open to deploying ground troops to Romania and Bulgaria under NATO command.  The United States is considering reinforcing its own forces in Europe but no further details have yet been made available.

Global Markets Crater on Coronavirus Worries, and Oil Chaos

9398383

Global markets took one on the chin today, both literally and figuratively. A combination of coronavirus panic, and the unexpected oil price deadlock between Russia and Saudi Arabia sent investors reeling, and caused European, Asian, and North American stock indexes to crater. The Dow fell 2014 points, marking its worst day since 2008 as investors fled for safe havens such as precious metals, and US treasuries. Other markets around the world fared no better. European markets tumbled an average of 7 percent, and in Asia the Nikkei dropped more than 5 percent and the Hang Seng Index lost 4.2 percent.

All things considered, some degree of volatility was expected to dominate Monday’s sessions given the coronavirus situation. However, it was the situation in the oil markets that brought on the rout. The oil production standoff between Saudi Arabia and Russia over the weekend took the world by storm and sent oil prices spiraling to some of their lowest levels since the 1991 Persian Gulf War. As it stands right now, Russia and Saudi Arabia’s actions could lead to an oil price war, something that could bring on unforeseen circumstances for oil and stock markets down the line.

The markets could’ve handled one or the other today, either the volatility brought on by coronavirus fears, or the oil collapse. Taking on both and coming out unscathed, however, was not in the cards. It remains to be seen how today’s events will affect global economies. Another day like today would put Wall Street on the verge of a bear market, and could quite possibly cause the juggernaut that is the US economy to begin to lose steam.

The next forty-eight hours will tell us a lot.