Global stocks fell and investors turned to safe-haven assets on Tuesday as global markets reacted to escalating tensions between the world's two biggest nuclear powers: Russia and the US.
The pan-European Stoxx 600 stock index fell almost 1%, reaching 498.56, its lowest level since August. In the US, stock futures tied to the Dow Jones Industrial Average fell 0.5%, S&P futures slipped around 0.2%, while Nasdaq 100 futures lost 0.1%.
The drop came after Russian President Vladimir Putin amended Russia's nuclear doctrine, which outlines the circumstances under which Moscow will use its nuclear weapons, Russian state news agency Tass reported on Tuesday.
Essentially, Russia is now expanding the definition of conditions that could trigger a nuclear response to include "large-scale attacks using aircraft, missiles, and drones targeting Russian territory, Russian border crossings, as well as attacks on allies such as Belarus," according to Tass.
The prospect of increased nuclear tensions caused investors to turn to safe-haven asset markets. Gold prices were up 0.8% at 11:52 a.m. London time. In the currency market, the Japanese yen strengthened 0.7% against the euro and 0.36% against the US dollar. The Swiss franc also added 0.3% against the euro.
"The spike in bond yields and USDJPY was notable, but more interesting was how quickly it began to fade," said Erik Nelson, Wells Fargo Macro Strategist.
"There is still clearly a tendency to brace for higher inflation and strong growth as we approach the final week of the year. "Market participants may recall the main risks from the early stages of the Russia-Ukraine war and tend to take advantage of any decline in yields and USDJPY as long as signs of increased tensions remain verbal," he added.
Although Moscow had signaled an update to its nuclear doctrine months earlier, the amendment came just days after the US decision to allow Kyiv to use American-made long-range missiles on Russian territory, a major shift in Washington's policy regarding the war in Ukraine.
The oil market, most directly affected by the war over Western sanctions on Russian oil supplies, remained in the negative zone on Tuesday despite the possibility of a confrontation between the world's two biggest crude producers.
