Although all eyes had been on the military build-up by Russia against Ukraine in recent weeks, it did still seem to come as a surprise to markets when the invasion actually happened in the early hours of Thursday. This delivered a significant amount of market volatility across many major asset classes—but initial focus was on the price of oil.
After closing around $92 a barrel at the end of US trade on Wednesday, West Texas crude touched $100 before lunchtime on Thursday. Gold was also a favorite—briefly lifted to its highest price since August 2020, as investors sought safe havens.
But the interesting market story from Thursday is not the initial knee-jerk reaction—but what happened afterwards. By the end of trade in New York, the oil price had given up almost all of its gains and was back at $93; gold was actually trading below where it had closed the previous day, after travelling through a range of around $100 during Thursday’s trade.
This was clearly a major turnaround, and no doubt left plenty of momentum traders who had jumped in earlier in the day licking their wounds. And let’s not forget about stock markets. Unsurprisingly, the immediate reaction was to hit the sell button and most major stock indices opened well below their previous close.
But then, contrary to perhaps what many were expecting, US markets spent much of the day gaining back ground and actually finished positive, with the tech-biased NASDAQ 100 one of the star performers ending more than 3% higher than where it closed on Wednesday.
There is the phenomenon in markets of "buy the rumor, sell the news," and perhaps we have seen this in reverse this past week. The uncertainty ahead of any conflict unsettled markets, but once the initial surprise of the invasion had happened, perhaps financial markets have then discounted that into the price.
Of course, let’s not get too carried away with thinking the absolute low for stock markets was seen last week. Investors still have the ongoing threat of higher inflation—hardly helped by the risks to further oil price rises from here. And what that could mean for interest rate hikes as 2022 unfolds.
But the turnaround in major markets on Thursday does suggest that for now perhaps the extreme highs in oil and gold could well have been seen, and it is a question of traders watching and waiting for the next steps in Ukraine. 
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