Russia's invasion of Ukraine causes turmoil in global financial markets.

• Early Thursday morning, Russian President Vladimir Putin announced a "special military operation" following the formal recognition of two breakaway regions in eastern Ukraine as independent two days prior.
• As Russian troops arrived on the southern coast of Ukraine, explosions were heard in Kyiv and other cities around the country due to the launch of missiles.
• Mark Haefele, chief investment officer at USB Global Wealth Management, stated that the heightened volatility on the escalation of the conflict indicates that markets had not fully priced in the likelihood of deeper conflict.

The invasion of Ukraine by Russian forces on Thursday caused seismic reactions in global markets, escalating a long-standing diplomatic conflict into a military one.

On Thursday morning, Russian President Vladimir Putin announced a "special military operation" in Ukraine, two days after recognizing two breakaway regions as independent. Reports of explosions in Kyiv and other cities followed, as Russian missiles were launched, and more troops arrived on the southern coast of Ukraine.

Western powers are preparing to impose more severe and damaging sanctions on Russia, as the U.S. and Europe have vowed to hold Moscow accountable.

The continental index plummeted more than 3%, reaching its lowest point of the year, while Germany's DAX dropped 4%.

The decline in shares in Asia-Pacific, with Hong Kong's leading the way at 3.2%, was across the board.

The Nasdaq Composite, S&P 500, and stateside stocks all experienced declines, with the Nasdaq Composite losing the least at 0.4%, while the S&P 500 dropped the most at 1.2%.

Since 2014, international oil benchmark prices have surpassed $100 per barrel for the first time, with Brent futures trading 6.7% higher at $103.25 per barrel and WTI futures up 4.7% at $96.45 per barrel as of 11:50 a.m. ET.

The ruble initially hit a record low against the dollar, with the dollar gaining over 10% against the ruble to reach 89.89 to the dollar. However, the ruble later regained some of its losses, and is currently trading at 87.04 to the dollar. Meanwhile, natural gas prices also increased.

Early on Thursday morning, the Moscow Exchange temporarily halted trading on all of its markets as Russian stocks plummeted. The exchange resumed operations at 10 a.m. Moscow time. The MOEX stock was last seen down 33.3%, while the RTS Moscow index had fallen 39%.

Wheat futures reached their highest level since 2012 and set an all-time high, while gold jumped to its highest level in more than a year before paring its gains.

Uncertainty over the conflict's duration and extent, potential supply shortages, worsening inflation due to surging energy prices, slowing economic growth, and increased risk of policy errors from central banks caught in a unique conundrum are among the challenges that global investors are facing.

Mark Haefele, chief investment officer at USB Global Wealth Management, stated that the heightened volatility on the escalation of the conflict indicates that markets had not fully priced in the likelihood of deeper conflict. He expects continued volatility in the near term as leaders calibrate and announce their response to this escalation.

Russia's strong commercial ties with Europe, which accounted for 36.5% of all Russian imports and 37.9% of exports in 2020, could help mitigate the risk of a long-lasting military engagement, according to UBS strategists.

UBS advised investors to maintain a diversified portfolio, utilize commodities as a geopolitical hedge, position for U.S. dollar strength, invest in global growth winners, and increase defense holdings during the current period of uncertainty.

On Thursday, Goldman Sachs analysts pointed out that the crisis had caused the Federal Reserve's risk index to reach a high level. However, the direct impact on the U.S. economy will be limited compared to Europe, which is more vulnerable to trade disruptions, higher energy prices, and stricter financial conditions.