MOEX Index and Ruble Slide After Ukraine Announces Strikes

Russian equities and the ruble weakened sharply after Ukrainian President Volodymyr Zelensky announced a 40-day campaign of attacks on key Russian assets. The USD/RUB rate reached 78.6860, its highest level since April 8, while the MOEX Index is about 10% below its peak for the year and has entered a corrective phase.

Ukrainian strikes have caused power outages in several major cities and prompted a state of emergency in Crimea. Attacks on refineries have reduced local oil processing capacity and raised concerns about fuel supplies in some regions.

Urals crude has fallen to roughly $57 a barrel, lagging Brent and West Texas Intermediate. Lower crude receipts reduce export revenue and affect the earnings outlook for the largest companies listed on the MOEX, which are concentrated in the energy sector.

Russian authorities have taken measures to limit shortages. The Kremlin formed a task force to secure domestic supplies, and the government banned diesel exports to keep fuel available for local markets.

New economic data and policy actions have reinforced market pressure. The budget deficit exceeded 6 trillion rubles ($81.4 billion) in the first five months of the year, about double the amount recorded a year earlier. The economy contracted by 0.2% in the first quarter. The central bank reduced its key rate by 25 basis points to 14.25%, a smaller cut than many analysts had expected.

Technical indicators show further downside risk for Russian markets. The MOEX slid from around 180 earlier in the month to near 165, moving below its 50-day and 100-day exponential moving averages and with MACD lines below the zero level. Some technical analysts project the index could fall toward 150 if selling continues. The ruble’s decline has coincided with a stronger U.S. dollar; the DXY index is at multi-month highs, and USD/RUB has moved above its 50- and 100-day moving averages and the 74.60 chart neckline, with some traders monitoring the 85 level.

Market participants pointed to renewed military pressure, damage to energy infrastructure, lower oil revenues and fiscal strain as the main drivers behind the asset sell-off. Volatility in returns has increased as participants reassess exposure to Russian assets.