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How the Ukraine crisis could affect financial markets

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Yahoo Finance's Rick Newman joins the Live show to discuss geopolitical tension with Russia escalating, the possibility of President Biden deploying U.S. troops to Ukraine, and the outlook for the financial market.

Video Transcript

- The US State Department said Sunday it was ordering family members of diplomats to leave the Ukraine as tensions with Russia escalate. Yahoo Finance senior columnist Rick Newman has more on this. Rick, good to see you here. We're seeing the stock market really slide I would argue because of Fed interest rate concerns. But there's a potential market risk here with this Russia situation in that maybe oil prices break through $100 a barrel.

RICK NEWMAN: Yeah, so a lot of these-- a lot of times when we see these types of geopolitical tensions, markets get a little wobbly, and then everybody looks around and says, wait, is this likely to affect the financial markets in any way? And the answer is no. Not quite the case here because if Russia does make some sort of move on Ukraine, there probably will be US and European sanctions. Those could relate to the financial system and not so much oil markets.

But look, Russia is a huge oil producer and also a very large natural gas producer, most of that exported natural gas going to Europe. So if there are some kind of sanctions or if Russia were to try to weaponize energy in this case by, for example, withholding natural gas shipments to Europe, that could directly affect energy markets. So traders and investors definitely need to be thinking about this.

JULIE HYMAN: Well, and let's talk about there is the direct sort of linear effect of some kind of conflict. There's also, of course, the psychological effect here because there was a report in "The New York Times" this morning that President Biden is considering sending troops to that area of the world to Eastern Europe. And you know, markets do not have a consistent reaction to military conflict around the globe. But it seems like in this current environment, just one more thing like this is not being happily received.

RICK NEWMAN: Well, in the big picture, Julie, we're talking about the potential for a land war in Europe. I mean, that's what could happen here. My best guess is that this was just a trial balloon from the White House or from somebody in the State Department just to see what the reaction might be to the thought of US troops either in Ukraine or near Ukraine.

My best guess that is not going to happen. Let's remember President Biden pulled the United States out of Afghanistan. He was-- something he was in favor of doing for a long time. And it doesn't seem likely that he would wind down a deployment such as that and then put US troops into some kind of confrontation with Europe with a very uncertain end state.

So I don't think that's going to happen. But this is a very dangerous situation. Nobody knows if Putin is bluffing with all these troops, 100,000 troops or so massed around Ukraine, or if an invasion might actually be coming. So this is not something to be taken lightly. This is this is serious what's going on.

- And it appears the market is taking it very seriously to your point. Rick Newman, thanks so much.

RICK NEWMAN: All right, guys.