london feb 22 reuters  stock markets tumbled on tuesday while bonds and commodities rallied after russian president vladimir putin ordered troops into the breakaway regions of eastern ukraine read more below is reaction from analysts and asset managers to the latest events the shortterm market reaction will depend on the extent of sanctions imposed by the west western leaders have two options – a modest approach trying to signal deescalation what markets want to see or a firmer approach recognising that allowing putin to dismantle ukraine piece by piece will still achieve his end goal over a longer timeframe eu ambassadors are meeting today to discuss their plan for sanctionsthe us response is probably more important this boils down to whether this is termed an invasion or not blinken is still scheduled to meet lavrov in geneva on thursday while we believe it is too early to make a final assessment on what mondays events may mean for the course of events we remain of the view that the severe risk case we described earlier  including fighting and a prolonged interruption of russian energy exports  still represents a tail risk at this stage allocations to commodities and energy stocks are an attractive option to help investors hedge portfolio risks energy prices would likely rise in the event of an escalation around ukraine as well as if cooler heads prevail amid rising demand and somewhat constrained supply while the path of russiaukraine crisis remains unclear with potentially elevated market volatility in the shortterm tightening monetary policy in our view still remains the key risk for equities as central banks attempt to aggressively reanchor inflation expectations lower overly restrictive monetary policy could result in an outright policy error especially if the business cycle continues to deteriorate at the same time the russiaukraine crisis could force a reassessment of the fed tightening path resulting in central banks turning less hawkish while policymakers may consider additional fiscal stimulus the developments have provided a major blow for any remaining hopes for last minute diplomatic solution to avoid conflict in the ukraine which will surely be even harder to avoid now after russia chose to blatantly disregard the minsk agreement there is now a significantly higher risk that tensions will continue to escalate in the region triggering a sharper selloff for the rouble and placing more downward pressure on other european currencies that should boost the relative appeal of the us dollar whilst the escalation in tensions is unwelcome it is unlikely to alter global economic variables that much the initial reaction to president putins declaration was an immediate riskoff with oil prices spiking our sense is that part of the equity move was a miscalculation over the earlier russian troop withdrawal russias economy is itself strong with record fx reserves signs of inflation peaking jan 87 its highest current account ever and debttogdp 20 the ukrainian currency has been under pressure recently while government bond yields have spiked but not to the extent seen during the annexation of crimea reporting by reuters markets team compiled by karin strohecker editing by sujata rao