Looming Russia-Ukraine conflict sends chill through City

Unity March Held In Kyiv As Russian Military Invasion Seems Imminent
In a bruising day on the Square MIle, the FTSE 100 and FTSE 250 tumbled 1.69 per cent and 1.95 per cent respectively, amounting to a more than £50bn hit to Britain’s blue chip firms (Photo by Chris McGrath/Getty Images)

Mounting fears over an imminent Russian insurgency of Ukraine rippled throughout the City yesterday, wiping billions off of the value of the UK’s top companies.

The potentially devastating impact of a war in eastern Europe spooked investors and sent them flooding into safe assets.

In a bruising day on the Square MIle, the FTSE 100 and FTSE 250 tumbled 1.69 per cent and 1.95 per cent respectively, amounting to a more than £50bn hit to Britain’s blue chip firms.

The rout comes just days after the FTSE 100 recovered all its Covid-19 losses.

Prime Minister Boris Johnson yesterday warned the Ukraine-Russia situation is “on the edge of a precipice”. 

Ukrainian miner Evraz, which is also listed on the FTSE 100, took a beating yesterday, plunging nearly 30 per cent, although much of the fall was driven by a demerger.

Fears over the possible spillover impact on the European economy from heightened geo-political tensions between the bloc and Moscow led to the City selloff to spread into the Continent.

The pan-European Stoxx 600 index plummeted 1.92 per cent, while Germany’s Dax 30 suffered a 2.02 per cent drop. France’s Cac 40 closed 2.27 per cent lower.

Experts warned a war between Russia and Ukraine would add to inflationary pressures that are already expected to choke the UK’s economic recovery this year.

“In addition to the human toll and geopolitical consequences, a major conflict could have significant economic implications,” Ian Stewart, chief economist at Deloitte, warned.

“Geopolitical risk and disruption to commodity supplies would be likely to weigh on growth and asset prices and fuel inflation,” he added.

In a sign prices in the UK are set to surge even higher, oil contracts hit a seven year-high, while UK gas futures continued to climb on concerns Moscow will squeeze supply if Western leaders retaliate to an invasion of Ukraine with tough economic sanctions.

Elevated oil costs have already sent petrol prices in the UK to their highest level on record, adding to the cost of living crisis severely squeezing British households.

However, signs emerged yesterday of a potential deal to avoid a conflict after Russian foreign minister Sergey Lavrov urged President Vladimir Putin to persist with diplomacy, stemming losses on Wall Street.