The military conflict in Ukraine came as a shock to global markets. It can be called differently, however its essence is the same. It was repeatedly mentioned that no countries benefited from this military conflict. The EU and Western countries are allocating huge sums of money to provide arms, finances, and humanitarian aid to Ukraine. Moreover, they agreed to accept Ukrainian refugees. According to various estimates, about 5 million refugees have already fled Ukraine. Besides, these people need food, a place to live, and to be paid benefits. Therefore, apart from providing financial assistance to Ukraine, many countries had to pay additional costs for hosting and integrating Ukrainian refugees. Ukraine has suffered heavy economic losses. Many Ukrainian cities have already been destroyed or severely damaged. The process of rebuilding the country is long-lasting, even taking into account the EU financial aid. The US, the UK and the EU imposed many draconian sanctions on Russia in the last three weeks. Besides, the EU and Western countries were hit hard by these sanctions as they have lost one of the major market outlets for their products. Notably, any oil or gas embargo will mean that oil and gas prices will continue to rise, forcing Western countries to pay more for the same volume of oil and gas imports. Therefore, it is evident that many global economies have been deeply hurt.
The United States still remains in the dominant position. Firstly, its economy has grown significantly during the last two years and has fully recovered from the Covid-19 pandemic and the crisis. Secondly, Russian oil and gas exports are negligible as the US is far from Russia. Thirdly, the US is a rich country and can afford to impose sanctions. However, this does not mean that there will be no economic consequences. Meanwhile, the highly anticipated Fed meeting will be held tomorrow. The Monetary Committee may decide to raise the interest rate by 0.25%. Besides, the rate hike has been widely discussed over the past three weeks. US inflation is hitting all-time highs and it needs to be dealt with. However, it is not clear how long the Ukraine-Russia conflict will last or what its outcome will be. Jerome Powell has already stated that the Fed needs to take a very cautious stance on tightening monetary policy. That means there may be fewer rate hikes in 2022 than expected before February 24. This is positive news for the stock market.