Goldman Sachs predicts the S&P 500 will tumble 6% if there is outright conflict in Ukraine and punitive sanctions for Russia

• The S&P 500 is likely to tumble 6% if there is outright conflict in Ukraine, according to Goldman Sachs.
• Goldman's model used moves in the Russian ruble as a benchmark to gauge how far global assets might fall.

The S&P 500 could tumble another 6% from its Monday level if there is outright conflict in Ukraine and Western governments impose punitive sanctions on Russia, Goldman Sachs has said.

Russian President Vladimir Putin on Monday ordered Russian forces to enter eastern Ukraine as he formally recognized two rebel-held regions there.

In response, the US, EU and UK are preparing to impose sanctions on Russia. US officials believe that Putin could soon order a broader attack on the eastern European country, and one British minister said on Tuesday that "the invasion of Ukraine has begun."

Goldman analysts, led by Dominic Wilson, said in a note Monday that the S&P 500 could drop 6.2% in a scenario in which tensions flare up further and "outright conflict" breaks out.

The tech-heavy Nasdaq could tumble 9.6%, and Europe's continent-wide Stoxx 600 could fall 9.3%, they said.

The analysts reached their rough predictions by looking at recent moments when tensions flared, and measuring how sensitive global assets have been to changes in the Russian ruble. They estimated that the ruble could plunge 10% against the dollar if the conflict intensifies.

A 6.2% drop for the S&P 500 would take the blue-chip US stock index well into so-called correction territory, which is defined as being 10% or more off recent highs. The index had already fallen 8.8% in 2022 as of Friday's close, with the Federal Reserve's plans to hike interest rates weighing on stocks.

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"If risks flare up further, and we shift to an outright conflict scenario coupled with punitive sanctions, the build in political risk premium would very likely extend," Goldman's analysts wrote.

The Russia-Ukraine crisis has injected yet more uncertainty into an already cloudy picture for investors. Stocks have fallen sharply, and bonds have risen as investors have sold risky assets in favor of safer ones.

Yet analysts have been struggling to work out exactly what might happen to financial markets if Russia attempts to invade the whole of Ukraine, as US officials have said it plans to.

Goldman estimated that WTI oil, the US benchmark price, could shoot 13.4% higher if conflict intensifies, given the importance of Russia and Ukraine to global energy markets. WTI was up around 3.1% to $93.91 a barrel Tuesday.

However, the analysts cautioned: "Given a rapidly-evolving geopolitical outlook, of course, year-to-date correlations may be an imperfect guide to any future market impact from geopolitical tensions."