U.S. stocks have barely budged in trading Wednesday despite an escalation of the conflict.
For now, Wall Street is monitoring the volatile and deadly clash from afar. U.S. investors are betting that it's unlikely that the geopolitical risk emanating from such a small economy will have a measurable negative impact on the global economy or U.S. corporate earnings.
According to the World Bank, the Ukraine's economy measured in U.S. dollars totaled $176.3 million in 2012, the latest data available. That ranks the Ukraine economy 53rd in the world, just slightly ahead of developing nation Vietnam. For comparison purposes, the U.S. economy is a $16.2 trillion enterprise.
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"No, Ukraine is not a front-page story for Wall Street," says Todd Schoenberger, managing partner at hedge fund LandColt Capital. "There is not a dramatic economic impact to the U.S. You don't get the feeling that the clash there will impact, say, corporate earnings in the U.S."
More than half of the Ukraine's exports, which include metals, chemicals, machinery and petroleum products, go to Russia and other post-Soviet states. The country, however, gets most of its natural gas from Russia, which is also a major supplier to other major European countries.
But as is the case with any violent confrontation around the increasingly connected globe, there is a risk of spillover effects, Wall Street pros say.
If natural-gas rich Russia, which supports Ukranian president Viktor Yanukovych and has provided both financial aid and cheaper natural gas to the regime, ramps up its involvement or civil war breaks out, market jitters could increase, adds Andrew Busch, founder and editor of The Busch Update.
"Russia may begin to become more belligerent to the West, including the U.S. and Europe," he say! s.
Russia, of course, is a major player in the world's natural gas market. That gives them greater influence in the conflict, especially given its close proximity to key European capitals which rely on Russian energy exports.
How energy costs are impacted will be also closely watched by Wall Street.
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"(Russian president Vladimir) Putin may play some games with oil and natural gas production and pipelines," adds Busch, which would cause markets to react more negatively.
Wall Street, of course, has shrugged off other political confrontations in recent years, especially in the volatile Middle East.
Still, any Russian intervention would likely "dial up the risk levels in Europe," says Brad McMillan, chief investment officer at Commonwealth Financial Network.
"One risk factor," says McMillan, "is if Russia cuts off or limits natural gas supplies to Europe." That is the "most probable transmission mechanism" for additional problems that could rattle markets.
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