A Russian Nuclear Attack and the Stock Market

Russian leader Vladimir Putin says he will expand the size of the nation’s army. The government plans to add 300,000 troops to its military. This could cause trouble among the broader population of the country, which has not directly had to face most of the consequences of the invasion of Ukraine, other than those that are economic. Putin also once again threatened the use of nuclear weapons.

Tactical nuclear weapons are usually built as bombs or missiles. They are meant to be used primarily on military targets. Along with their ability to create powerful explosions, they can spread radiation, potentially over a wide geographic area. In the case of Russian weapons, this could include parts of Europe.

President Biden recently warned Putin against the use of tactical nuclear weapons. Although he did not specify a response, he said it would be forceful. Among Biden’s own weapons is that he refuses to tip his hand by being specific.

The use of a nuclear weapon in Europe would be the first time since atomic bombs were dropped on Hiroshima and Nagasaki, which cost over 200,000 lives.

Could the start of a nuclear war in Europe collapse the American stock markets, and with it stock markets around the world? Would the reset be a drop of 50%? It is worth noting the market declined by that much during the Great Recession, which pales by comparison to a European military conflict.

While a recession is likely, both in the United States and worldwide, its effect on the markets may be to push them down 20% to 30% from current levels. This is based on a decline in economic activity and not what could be the start of a major conflict in Europe or the start of a world war.

Could the market reset 50% lower if Russia uses tactical nuclear weapons in Europe? If an economic downturn can cause a huge sell-off, imagine what would happen in the case of a tremendous global catastrophe.

Originally posted at 24/7 Wall St.

By Douglas A. McIntyre