Russian Financial Markets Plummet Amid Trump's Tariffs and Oil Price Decline
The Russian financial landscape has experienced a significant downturn, with markets enduring their most challenging week in over two years. This decline follows the announcement of extensive tariffs by U.S. President Donald Trump and a sharp drop in global oil prices.
Data from the Moscow Exchange (MOEX) indicates that the market capitalization of listed companies has decreased by 2 trillion rubles (approximately $23.7 billion) in just two days. The total market capitalization fell from 55.04 trillion rubles ($651.8 billion) at the close of trading on Wednesday to 53.02 trillion rubles ($627.9 billion) by the end of trading on Friday.
The MOEX Russia Index, which monitors 43 of the nation's largest publicly traded companies, saw a loss of 8.05% over the week, marking its steepest decline since late September 2022. This previous downturn was triggered by the Kremlin's mobilization announcement concerning the ongoing conflict in Ukraine.
By the conclusion of trading on Friday, shares of major Russian corporations experienced substantial losses. Notable declines included Sberbank, which fell by 5.2%, Gazprom by 4.9%, and VTB by 6%. Other significant drops were recorded for Rosneft at 3.9%, Lukoil at 4.6%, and Mechel, the steel and coal producer, which saw a drop exceeding 7%. The national airline, Aeroflot, decreased by 4.8%, whereas gas producer Novatek fell by 5.4%.
Analysts are voicing concerns over the potential onset of a massive economic crisis. J.P. Morgan has increased its estimates of the likelihood of a global recession to 60%, attributing this to the impact of the tariffs on raw material prices.
The tariffs have driven down the prices of commodities, with Brent crude oil decreasing by 12% over the last two days, briefly hitting $64.06 per barrel, a level not seen since April 2021. Additionally, copper futures have also dropped by 11% during this period.
In the United States, the S&P 500 index fell by over 10% between Wednesday and Friday, while European stock exchanges experienced declines of 4-5% on Friday, following China's retaliatory imposition of a 34% tariff on all U.S. goods.
Experts warn that the ramifications of a potential global trade war would severely affect Russia, a nation heavily dependent on commodity exports. Observers point out that lower energy prices, increased import costs, and renewed inflationary pressures are all possible outcomes of such a scenario.
Since mid-February, the MOEX has lost 17% of its value, with major corporations seeing double-digit percentage declines. Gazprom has plunged by 30%, Norilsk Nickel by 25%, and Rosneft by 28%. Furthermore, Russian Urals crude, a key export product, is now trading below $60 per barrel, indicating potential issues for the state budget and a possible devaluation of the ruble in the coming months.
While some analysts suggest that progress in peace negotiations could stabilize the situation, the outcome remains uncertain. Recent discussions involving Kirill Dmitriev, head of the Russian Direct Investment Fund, and U.S. officials did not appear to yield any advancements towards resolving the conflict in Ukraine.
U.S. Secretary of State Marco Rubio emphasized that the administration will soon ascertain Russia's seriousness regarding peace talks, indicating that the situation remains tense and unresolved. NATO officials have observed no changes in Russia's war objectives, further complicating the prospects for a diplomatic resolution.
