In the latest escalation of the conflict, Moscow residents are reporting black rain after the largest Ukrainian attack hit a major oil refinery. The fallout is being felt far beyond Russia's borders. For London markets, this is yet another shock to an already fragile energy sector.
Oil prices surged overnight, and UK petrol costs are set to rise again. This attack underscores the vulnerability of energy infrastructure in wartime, and investors are jittery. The bond market is starting to price in higher risk, with gilt yields creeping up as foreign capital seeks safer havens.
The government's fiscal plans, already under pressure, now face the spectre of inflation from another supply side shock. The Chancellor will need to reassure markets that the UK can weather this storm without stoking inflation. But as we saw with the energy crisis last year, these exogenous shocks have a way of derailing the best laid plans.
For now, the message from the City is clear: brace for volatility.
