Stocks fell Monday as investors kept an eye on Ukraine’s situation. Russian troops are advancing along Ukraine’s borders.

S&P 500 fell 17 points or 0.4% to close at 4,402. The Dow lost 0.5% to close at 34,566 while the tech-heavy Nasdaq Composite was flat.

Rabobank stated in a report that “Markets are lately awakening to the geopolitical risk posed by Russian military actions against Ukraine.”

According to a U.S. official, Russia moved long-range artillery and rocket launches into firing positions, potentially threatening Ukraine. According to a U.S. official, the U.S. announced that it will close its Ukrainian embassy and move all staff members there to a nearby city.

The British prime minister stated earlier that Europe was “on the edge” of a precipice, citing an American warning about Russia’s possible invasion of Ukraine within the next 48 hours.

Shock is on the horizon for energy markets

Wall Street’s benchmark S&P 500 index fell 1.9% Friday as Russia threatened to invade Ukraine. told Americans that they should leave the country within 48 hours. Other governments, including Russia, pulled diplomats out of the country. European markets fell sharply. Crude oil prices fell slightly, while Treasury yields rose. The 10-year note yield rose to 1.99%.

Russia is the largest oil producer. A military strike that interrupts supply could cause shockwaves in the energy markets and global industry.

Simon MacAdam, senior global economist at Capital Economics, stated in a report that the EU is heavily dependent on Russian energy imports. Russia supplies 40% of its oil products, coal and a fifth its natural gas.

Potential for rapid escalation

Analysts at Raymond James, an investment bank, stated that they see a rising potential for rapid market disruption and associated escalation even before the Olympics end – increasing macro risk sentiment.

Investors were already worried about Federal Reserve plans to reduce economic stimulus to cool down inflation, which is at an all-time high of four decades. They also wondered how fast Europe and other central banks would respond.

Investors moved their money into Treasury bonds, Gold and other assets that were considered safe havens. On Friday, the market price for a 10-year Treasury increased, lowering its yield (or the difference between the day’s price and the payout if it is held to maturity) to 1.92%, from Thursday’s 2.03%.

According to a research note, David Kelly, JPMorgan Funds’ chief global strategist, stated that a Russian invasion in Ukraine would be a major threat to global financial markets. Russia supplies approximately a third of all European natural gas consumption and more than 10% of world oil production. Prices would rise if these supplies were shut down or threatened to shut down, which would increase prices from their current high levels.

The Fed is expected to raise interest rates seven times this year, after Treasury prices have been falling due to expectations. The Fed’s ability to cool inflation would make bonds more attractive investments.