The first month of the Russia-Ukraine war has driven volatility up across the board, though with some recent signs of stabilisation in equity markets. Europe is the area most exposed to the war – in particular, through the effects of higher energy prices, supply chain disruptions, and geographic proximity, but the commodity squeeze goes far beyond energy to include agricultural commodities and metals.
Against this backdrop, safe-haven demand remains strong for gold while Treasury yields have recently been driven by higher inflation and rate expectations, with the yields moving upwards across the curve. While uncertainty on the war front remains high, markets are trying to assess what additional sanctions could be put in place against Russia or if the next diplomatic steps could become more productive – or, in the bear case, the risks of an extension in terms of time and geographical reach of the crisis.
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