Tensions over Ukraine have been simmering for weeks and now threaten to spill over into a much deeper risk-off mood in global financial markets, some analysts say.
"I do think there is more room for a risk-off move given this Ukraine issue, which has been bubbling away in the background but is increasing in intensity," Laura Fitzsimmons, the vice president for futures and options at JPMorgan Investment Bank in Sydney, told CNBC. "That could crystalize in the next few weeks to become an issue for markets."
The flashpoints of eastern and southern Ukraine were quieter Tuesday following the escalating tensions of Monday and the weekend when pro-Russian rebels shot down a Ukrainian helicopter in fierce fighting on the eastern town of Slaviansk and Ukraine drafted special police forces to the southwestern port city of Odessa to stop rebellion spreading west, Reuters reported.
Ukraine has been in the market spotlight since February when the pro-Russian former President Viktor Yanukovich was ousted from power following street protests that turned violent. A pro-Western interim government took charge and not long after Russia used its military to back separatists in Ukraine's Crimea region, triggering sanctions from the U.S. and Europe.
Separately, the Russian Ministry of Finance said it is expecting Russia's gross domestic product to drop in the second quarter, according to news agency RIA. This would mark a second quarter of contraction for Russia.
Quoting ministry director Maxim Oreshkin, RIA reported Tuesday that economic performance in the third quarter will be largely affected by geopolitical risks and bank credit. Oreshkin added that April saw weaker gas production, freight transport and business activity signs.
Fighting in parts of Ukraine has intensified, fueling fears that the crisis may not be contained as previously hoped.