Where Next For Investors In Russia After Geopolitical Tensions Reach Breaking Point?

On 6 April, the US hardened sanctions imposed on Russia by targeting seven of the country's richest men, as well as 17 government officials.

The move followed what Western powers view as aggressive acts from Russia, including the Salisbury incident in the UK where a former Russian spy was poisoned and its interference in the 2016 US Presidential Election.

Tensions were exacerbated last week following a suspected chemical attack in Syria by Russian ally President Bashar al-Assad, which left more than 100 dead.

In response, Trump cancelled his trip to a number of South American countries to meet with military officials in the White House to discuss the US's response to the attack.

He also warned Russia to stop supporting Assad and claimed the US relationship with Russia had reached its worst point in history, even accounting for the Cold War.

'A policy mistake of gigantic proportions': Markets and experts react as China hits back at Trump'strade tariffs

Trump said on Twitter: "Many dead, including women and children, in mindless CHEMICAL attack in Syria. Area of atrocity is in lockdown and encircled by Syrian Army, making it completely inaccessible to outside world. President Vladimir Putin, Russia and Iran are responsible for backing animal Assad. Big price...

"Russia vows to shoot down any and all missiles fired Syria. Get ready Russia, because they will be coming, nice and new and "smart"! You should not be partners with a gas-killing animal who kills his people and enjoys it," he added.

On the news, Brent crude spiked to its highest level since December 2014 last Wednesday, rising to $72.3 a barrel, amid concerns future US involvement in the Middle East could disrupt supply chains, making it harder to ship oil overseas.

Safe-haven assets were also given a boost, with gold climbing 1.8% to $1,363 an ounce - its highest level since January - while US equity markets sold off. 

Russia market sell-off 

The move to more aggressive sanctions by the US caught Russian markets by surprise.

Russian bonds saw the biggest spread widening since the Crimean annexation in 2014, causing the first bond auction cancellation in the country since 2015.

The ruble fell 11% to 64.8 against the dollar, a bigger fall than in 2014 and its lowest level since December 2016.

In equity markets, Russia's MOEX index fell 8.5% on Monday before bouncing 4% the following day as a result of strengthening oil prices, while the MSCI Russia index slumped 27.7% over the four days to 10 April.

However, a number of equity managers have viewed the dramatic fall in prices as a potential buying opportunity, arguing that the worst of the political tensions has now abated.