Putin Revises Nuclear Doctrine For Broader Strikes After US-Backed Ukrainian Attack: Markets Drop, Bonds Gain

European markets sank on Tuesday and U.S. stock futures followed suit, weighed down by escalating geopolitical tensions after Russian President Vladimir Putin revised the country’s nuclear doctrine to broaden the conditions for deploying atomic weapons.

Putin's move to ease the threshold for nuclear strikes came just a day after the White House authorized Ukraine to deploy American-made long-range ATACMS missiles deep into Russian territory.

The Euro STOXX 50, as tracked by the SPDR DJ Euro STOXX 50 ETF FEZ, and STOXX 600 indices dropped 1.2% and 0.8%, respectively, both tracking toward their lowest closing levels since mid-August.

Putin Expands Nuclear Doctrine Amid US-Backed Ukrainian Strike

On Tuesday, Ukraine reportedly carried out its first ATACMS strike on a military facility near Karachev in Russia’s Bryansk region, about 70 miles from Ukraine, according to reports by RBC Ukraine.

RBC Ukraine cited a Defense Forces source confirming a successful strike, marking the first time these long-range missiles were used in such a capacity. Russia acknowledged the attack.

“Indeed, for the first time, we used ATACMS to strike Russian territory. The strike was carried out against a facility in the Bryansk region, and it was successfully hit,” the source reported.

On Monday, the previous day, U.S. Under Secretary of State for Western Hemisphere Affairs Brian A. Nichols officially confirmed that the White House had given Ukraine approval to use long-range weapons to target Russian territory.

European Markets React: Euro, Bank Equities Drop

The geopolitical developments triggered a sharp selloff across European equities. In Poland, the WIG20 stock index plunged 2.5%, reflecting the country's proximity to the conflict and heightened exposure to regional risks.

European banks also bore the brunt of the downturn, with the banking index slipping 2.2%. Among the hardest-hit financial institutions were CaixaBank SA CAIXY, which sank 5.1%, FinecoBank Spa FCBBF, down 4.2%, and Unicredito Spa UNCFF, which dropped 3.3%.

The euro also came under pressure, falling 0.3% to hover at $1.0550 against the U.S. dollar, as traders sought safety in the greenback amid mounting geopolitical risks.

Flight To Safety: Bonds, Gold Shine

Heightened geopolitical risks spurred demand for safe-haven assets. Yields on long-dated U.S. Treasuries fell by 4-5 basis points, lifting bond prices. The iShares 20+ Year Treasury Bond ETF TLT could see strong gains following this move.

Gold surged 1%, building on a 1.9% rally from the previous session, as investors sought shelter from rising uncertainties.

US Premarket Action

U.S. equity futures mirrored the cautious sentiment overseas, with Dow Jones Industrial Average futures down 0.4%, S&P 500 futures declining 0.3%, and Nasdaq 100 futures slipping 0.1%.

Walmart Inc. WMT surged over 3% in premarket trading after reporting stronger-than-expected quarterly earnings.

Among defense stocks, Lockheed Martin Corp. LMT gained 0.9%, while Boeing Co. BA fell by the same margin.

Read Next:

• Why Nvidia Earnings May Trigger Massive S&P 500 Volatility

Photo: Shutterstock