Investors’ initial, measured response to Russia’s invasion of Ukraine has gone out of the window.

As commodity prices surge higher the sell-off in global stock markets has intensified. But the last thing you should do is react rashly to this situation.

Essentially people are waking up to the idea that the devastating sanctions imposed on Russia will come at a significant cost to the rest of the world. The disruption to energy, food and metals markets is being reflected in surges higher for these commodities.

Or as George Lagarias, chief economist at global auditor Mazars, adroitly puts it ‘“Cancelling” Russia will be expensive.’

If the West follows through on an import ban for Russian oil, it wouldn’t be a surprise to see a fresh record for oil prices, taking out its previous all-time high of $147 per barrel marked in 2008. As we write the price has touched $139 per barrel just on the suggestion of a ban.

Oil at these levels adds up to a massive tax on growth, given the increased costs it entails for businesses and individuals.

Elsewhere a likely surge in food prices could have implications for geopolitical stability elsewhere in the world, particularly those developing countries where the cost of staying fed is a bigger proportion of household income.

We have had the latest reminder that the FTSE 100 is not representative of the UK economy and is a bit of an outlier relative to other global indices – something we discuss in our main feature this week. 

So, while the index is down 8.3% year-to-date, it has been spared the much larger losses seen in other markets thanks to its heavy exposure to the resources sector.

A better indicator of the strain war in Ukraine is putting on the UK economy is the FTSE 250 mid-cap index which is down more than 20% since the start of 2022 and 10% since the eve of Russia’s invasion.

The indiscriminate selling may well have created buying opportunities for those brave enough to take them and the Shares team will watch this space closely.

However, the best approach is to do as little as possible, assuming you still have time on your side to remain invested and ride out the volatility. While it’s hard to see it just now, there will be a recovery for the markets at some point and you don’t want to miss it by selling at a time of panic.

Lagarias adds: ‘Investors with a high tolerance for risk may choose to roll the dice. But for the critical mass of portfolio holders, those for whom risk is a measurable quantity and financial planning is part of the equation, we think that the best course is to avoid taking significant action before the dust settles and trust in the long-term properties of diversified portfolios.’

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