On Friday, investors got a taste of the kind of market turbulence that may occur if Russia invades Ukraine. The spark occurred after the White House advised Americans to leave Ukraine as soon as possible owing to fears of a Russian invasion. US shares finished substantially lower, crude prices soared to a seven-year high, closing in on the psychologically key $100 per barrel mark, and a surge in purchasing an interest in traditional safe-have assets pushed Treasury rates lower and strengthened gold and the US currency.

Until recently, investors had been betting on a diplomatic settlement, but recent events show that this may be wishful thinking, and hence not completely priced into the markets. To be clear, since the commencement of the Russian military buildup on Ukraine’s borders in October, the Russian stock market, which generally moves in lockstep with oil prices, has already lost more than a quarter of its value. Russia, on the other hand, is underrepresented in global indexes, accounting for just 3.2 percent of the MSCI Emerging Markets Index and 0.4 percent of the world stock market as assessed by the MSCI World Index.

Risk is predominantly concentrated in Europe in the financial industry. In recent weeks, Austria’s Raiffeisen Bank International AG became the first significant European institution to announce that it is putting money aside to deal with the crisis’ possible consequences. The bank’s Russian affiliate accounts for over a fifth of its revenue and around 40% of its earnings. Other banks having a significant presence in Russia include UniCredit of Italy and Societe Generale of France, both of which generate mid-single-digit percentages of their earnings in the country.

In terms of the influence on broader equity markets, history suggests that as long as military confrontations are kept limited, the impact is unlikely to last long, with no discernible effect for diversified investors.