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London CNN Business  — 

Russian President Vladimir Putin’s decision to invade Ukraine, which could spark the biggest war in Europe since 1945, has immediately stoked alarm among investors, who had been hoping such an outcome would be avoided.

What’s happening: News early Thursday that Russian forces had begun an attack on Ukraine, with reports of troops crossing the border to the north and south, immediately reverberated across the market.

Traders, who had already been on edge about soaring inflation and the looming end of pandemic-era support from central banks, dumped riskier assets like stocks while rushing into traditional safe-haven assets such as gold that get a boost during periods of uncertainty. Global oil prices topped $100 per barrel for the first time since 2014.

“Financial markets are predictably witnessing a flight to safety and may have to price in slower growth on the further spike in energy prices,” Chris Turner, ING’s global head of markets, said in a note to clients.

Here’s a rundown of how financial markets have been impacted.

Global stocks: Stocks in Asia plunged, but the sell-off accelerated as trading kicked off Europe. The region’s Stoxx 600 index plummeted almost 4% in early trading. Germany’s benchmark DAX index was nearly 5% lower. US stock futures also point to major losses when markets open.

Russian stocks: The MOEX index crashed by more than 40%. The Moscow stock exchange suspended trading earlier on Thursday. But when dealing resumed, stocks went into free-fall.

The ruble: Russia’s currency collapsed, hitting an all-time low against the US dollar and the euro. It was last trading at almost 84 to the dollar.

Crypto: Bitcoin, already under huge pressure, lost another 6% and was last trading near $35,000. It’s shed roughly half its value after hitting an all-time high in November. Ether also took a hit, dropping 9%.

Oil and gas: Oil prices are experiencing their biggest one-day run-up since 2020. Brent crude futures, the global benchmark, are up more than 8%, with oil topping $105 per barrel. In the United States, oil is near $100 per barrel. Natural gas prices are surging, too.

Gold: The yellow metal, which typically gets a boost when Wall Street is worried about inflation, jumped 3% to more than $1,960 per ounce. That’s its highest level since the middle of 2020.

Grains: Russia is the world’s top exporter of wheat, while Ukraine is a significant exporter of both wheat and corn. Wheat prices jumped almost 6% to their highest level since 2012. The price of corn leaped 5%.

Volatility: The VIX, which tracks S&P 500 volatility, just spiked 20%. The index is now at its highest level in more than a year.

Shielding Americans from spiking gas prices won’t be easy

President Joe Biden, facing the risk of a destabilizing energy price shock, is promising to blunt the effects of rising energy prices on American families.

But that won’t be easy, my CNN Business colleague Matt Egan reports.

The Russia-Ukraine crisis has already helped lift oil and gasoline prices to levels unseen since 2014. Further sanctions on Moscow could drive pump prices closer to $4 a gallon.

The latest: The national average for a gallon of gas rose to $3.54 on Thursday, according to AAA. That’s up from $3.33 a month ago and $2.67 this time last year.

Biden acknowledged on Tuesday that “defending freedom will have costs.”

“I want to limit the pain the American people are feeling at the gas pump. This is critical to me,” Biden said during prepared remarks.

Remember: Russia is the world’s second-largest oil producer and it exports 5 million barrels of crude per day. That’s roughly 12% of the global trade, according to the International Energy Agency.

There’s a long history of voters blaming presidents for high gas prices — fair or not. Yet presidents have limited power to drive down energy prices, as Biden himself has learned in recent months.

“Biden’s options mostly come in two categories: Nothing-burgers and mistakes,” said Bob McNally, president of energy consulting firm Rapidan Energy Group. “That’s true of almost all presidents.”

On the table: The United States could release more oil from emergency reserves in tandem with other countries. But Biden’s best bet to boost supply and bring down prices, purely from a financial perspective, might be reaching a nuclear deal with Iran.

“An Iranian nuclear deal that removes sanctions and raises production remains a wildcard, but the market will increasingly need additional oil,” analysts at S&P Global Platts Analytics told clients.

The global economy is bracing for impact

Western countries are preparing to hit Russia with more punishing sanctions aimed at deterring Putin from ramping up his military campaign in Ukraine.

Those penalties could do serious damage to Russia’s economy. But America’s and Europe’s economies will be affected by the conflict, too.

Europe is particularly exposed given its massive dependence on Russian energy. It imports about a third of its natural gas from the country.

Breaking it down: Rising energy prices accounted for more than half of the spike in inflation since March 2021 among the 19 countries that use the euro, according to UBS. Households are expected to cut back spending elsewhere if their electricity and heating bills continue to rise.

The region’s economy was already set to log slower growth this year as the post-pandemic boom fades. The International Monetary Fund projects that Europe’s economy will expand by 3.9% in 2022 after growing 5.2% in 2021.

A steeper slowdown: UBS estimates that for every 10% increase in the prices of fuels, electricity and gas, Europe’s economic growth will drop by 0.2 percentage points. Higher food costs as wheat and corn prices spike could also fuel inflation and hurt the economy.

A rise in food and energy prices will also cause pain across the Atlantic. Goldman Sachs has estimated that every $10 per barrel increase in oil prices will lower US GDP growth by just under 0.1 percentage points. Turmoil in financial markets could also weigh on the economy.

“A larger tightening in financial conditions and an increase in uncertainty facing businesses would further weigh on US growth,” the bank’s strategists told clients on Wednesday.

Up next

Alibaba (BABA), Moderna (MRNA), Planet Fitness (PLNT), Nikola and Papa John’s (PZZA) report results before markets open. Beyond Meat (BYND), Square parent Block, Coinbase and Dell (DELL) follow after the close.

Also today:

  • Initial US jobless claims for last week arrive at 8:30 a.m. ET.
  • US home sales for January post at 10 a.m. ET.

Coming tomorrow: The latest reading of the inflation measure most closely watched by the Federal Reserve.