The war between Russia and Ukraine is having severe global implications. The most immediate and dramatic impact is on the price of oil, which has skyrocketed to over $130 per barrel and represents an increase of over 60% in the past few months. Increased oil prices have a similar effect to increased taxes — both reduce how much people spend and can impact growth in the economy. Higher energy prices and wheat prices will contribute to the inflationary pressures. These events may impact the Fed’s stance on the timing of interest rate hikes.
Markets do not like uncertainty so expect the volatility to continue throughout the conflict. Events like these are great reinforcements to being fully diversified with risk in the forefront. Markets, historically, have rewarded investors for sitting through difficult times. Below is an article that reviews how markets perform during geopolitical events and offers a good perspective.