How the escalating Russia-Ukraine conflict could affect markets — short and long term

Stocks are down — what's new?... ICYMI: stocks have been falling all year as investors worry about inflation and the Fed’s coming interest-rate hikes. This month, there's a new concern: Russia's increasing aggression toward Ukraine. Refresher:

• 1991: Ukraine gained independence from Russia when the Soviet Union fell, but Russia has never fully pulled back its influence there (see: 2014 annexation of Crimea).
• Late January: Russia stationed 100K+ troops near its border with Ukraine, fueling invasion fears among Western leaders.
• Monday: Russian President Putin recognized the independence of two separatist regions in Ukraine (see: this brutal exchange) and ordered Russian troops to enter.
• Yesterday: President Biden said he viewed Russia's move into Ukraine as the beginning of an invasion, and announced the first wave of new US sanctions to cut off Russia from Western financing. Earlier, the EU agreed to ban the purchase of Russian government bonds.
• Also yesterday: Germany halted the key Nord Stream 2 pipeline, which carries gas from Russia to Germany (oil exports = 30% of Russia's economy).

The short-term effect on stocks... The S&P 500 index is down 5% for the month, as Russia-Ukraine tensions add to what’s already hurting markets:

• Uncertainty: While some uncertainty is always a given, high turmoil is usually bad for markets. Investors tend to retreat to "safe-haven assets" like government bonds, gold, and even "defensive stocks" like healthcare and utilities, which tend to be less affected by volatility.
• Inflation: Sanctions on Russia could cause prices of oil, food, and other commodities to soar even more. Russia supplies more than a third of the EU’s natural gas, while Russia and Ukraine produce much of the world’s wheat and corn.