Worries that the crisis in Ukraine is veering toward war roils financial markets

The Associated Press

Trader Peter Tuchman works on the floor of the New York Stock Exchange, Monday, March 3, 2014. Global stock markets are down sharply on tensions over Russia's military advance into Ukraine and the threat of sanctions by Western governments. (AP Photo/Richard Drew)

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By PAN PYLAS, AP Business Writer

LONDON (AP) — With Russia in effective control of Ukraine's Crimea peninsula and Western powers weighing sanctions against Moscow, investors around the world took fright Monday at how the crisis may escalate.

Over the weekend, the crisis ratcheted up as Ukraine accused Russia of a declaration of war and Western leaders raised the prospect of sanctions. The escalation in tensions has prompted sharp moves across financial markets from stocks to gold to wheat.

"Risk aversion is rife in the markets as the Ukraine crisis escalated further, prompting investors to rebalance their portfolios away from stocks and toward commodities and other safe haven assets," said Craig Erlam, market analyst at Alpari.

When geopolitical tensions run high, safe haven assets, such as gold and the Japanese yen, often get bid up, while stocks take a pounding. And that's what happened on Monday, notably in Russia, where Moscow's RTS stock index slid 12 percent while the dollar spiked to an all-time high of 37 rubles.

Elsewhere in Europe, the FTSE 100 index of leading British shares closed down 1.5 percent at 6,708.35 while the CAC-40 in France fell 2.7 percent to 4,290.87. The retreat on Germany's DAX was even greater — largely because the country is so reliant on Russian gas — with the index ending 3.4 percent lower at 9,358.89.

Wall Street took a hit too, with the Dow Jones industrial average down 1.1 percent at 16,142 and the broader S&P 500 index 0.9 percent lower at 1,842.

Among other financial markets, an ounce of gold was up 2.5 percent at $1,355 while oil prices pushed further above $100 a barrel, with a barrel of benchmark crude up 2.3 percent at $104.94. The euro was down 0.8 percent at 139.41 yen.

Developments in Ukraine have dominated the start of what is likely to be a busy week on the economic news front. As well as a raft of U.S. economic data that culminates with Friday's nonfarm payrolls figures for February, investors have the monthly policy meeting from the European Central Bank to monitor.

Monday's mood was set in Asia earlier. Tokyo's Nikkei 225 index dropped 1.3 percent to 14,652.23 while Hong Kong's Hang Seng fell 1.5 percent to 22,500.67. China's Shanghai Composite Index bucked the trend, adding 0.9 percent to 2,075.23 despite a survey showing manufacturing weakened in February and employers cut jobs.

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