Global markets saw Ukraine war as bigger threat than COVID-19 outbreak and 2008 global financial crisis, research finds

A colourful digital graphic illustrating the rise and fall of financial markets

The Russian invasion of Ukraine on 24 February 2022 escalated a dramatic conflict, with devastating effects felt by both communities on the ground, and internationally. Beyond the immediate reaction of world stock markets, newly published research from Lancaster University, the University of Westminster, the University of Kent, Queen Mary University of London and SOAS University of London, details how the global economy is still enduring the war’s consequences a year later.

In a paper newly published in the International Review of Financial Analysis, researchers used a range of statistical modelling to compare the economic fallout from the war with that of the recent Covid-19 pandemic and not-too-distant 2008 global financial crisis. While existing evidence has outlined the impact of sanctions, which vary across countries and industries, this new study gives a broader view of financial market stability around the world.

Overall, the study found that stock markets and commodities responded much faster to the Russian invasion than Covid-19 or the global financial crisis, when there was a lag of up to a week before investors reacted. The researchers say this shows the invasion was immediately seen as serious news on the global financial stage.

However, the intensity of the market response to the invasion was noticeably smaller than Covid-19 or the global financial crisis, which researchers believe is due to an expectation that war wouldn’t last long. Past war-like experiences have been very different – primarily involving one-off terrorist attacks, beyond the European continent, without widespread sanctions – and so investors may have drawn a false sense of security by comparing these events with the Russo-Ukrainian war.

In the short-term, researchers expect the war to restrict economic growth and increase inflation. GDP growth in 2023 is projected to slow to 2.25% worldwide, to 0.5% in the US and to 0.25% in the Euro area – well below pre-war forecasts. Global inflationary pressure that had been building since the Covid-19 pandemic has also been accelerated by the war’s impact on energy and food prices.

Longer term, researchers warn that the war’s macroeconomic impact may plunge global economies into recession – unless the right policy responses are prioritised now. Concerns sparked by the war around energy security and affordability may overtake the recent focus on efficiency and low-carbon ‘green’ goals, undermining climate action and jeopardising 2050 Net Zero targets. Rising food prices, production shortfalls and trade disruptions also pose major risks to international society.

Professor Marwan Izzeldin from Lancaster University Management School was one of the co-authors. He said: "The date of this publication coincides with the first anniversary of Russia’s ‘special military operation’ in Ukraine. Over this first year, the impact upon financial markets across the world has been profound, not least in consequence of compounding effects, from Covid-19 and of the legacy of the 2008 global financial crisis. Commodity markets are especially affected by Ukraine's inability to export and the sanctions imposed upon Russia, most obviously by the curtailment to gas supplies. For Europe, associated higher energy costs has either paused or postponed plans towards the development of a greener economy.

"In building upon an early insight from initial data-analysis across world markets, our paper indicates that long-term prospects for the world economy are dire."

Research author Gulnur Muradoglu,Professor of Finance at Queen Mary University of London, said: “Our study shows the need for stronger links between international relations and finance. Financial markets did not expect the Russian invasion of Ukraine, nor did they expect the war to be prolonged, with repercussions so far-reaching that even a year later they are still unfolding.

“Research is ongoing as the war continues, but this may prove the greatest hit to the global economy since the 2008 financial crisis, even exceeding the impact of the Covid-19 pandemic. It remains to be seen what remedial steps will be taken to tackle a global recession.”

Alongside Professor Izzeldin and Professor Muradoglu, the research team included Dr Vasileios Pappas from the University of Kent, Athina Petropoulou from SOAS University of London and Dr Sheeja Sivaprasad from the University of Westminster.

To read the paper in full, please visit:

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