The crisis in Ukraine may have slipped from the headlines briefly, but the increasing risks it poses shouldn't be far from investors' minds.
A week-long ceasefire, which ended at 10 p.m. local time on Monday, had offered breathing space for a negotiated settlement of Ukraine's conflict. After its conclusion, with no solution in sight, "the risk is rising," analysts at Teneo Intelligence wrote in a research note.
There was a distinctly militaristic tone to new President Petro Poroshenko's statement late on Monday that: "We will attack and free our lands. The decision not to continue the ceasefire is our answer to terrorists, militants and marauders."
Russia's main stock index, the Micex, fell 0.34 percent Tuesday morning, and the ruble fell by 0.7 percent against the dollar. Russian bond sales have slowed to a trickle since the crisis erupted, and a raft of Russian companies is expected to issue new bonds later this year, as debt repayments become due. These may be under threat if the region still looks unstable.
Since the overthrow of the Russia-backed government of then President Viktor Yanukovych in February, the country has been rocked by disputes over the governance of regions including Crimea and parts of eastern Ukraine, a conflict which has drawn attention around the world. Ukraine has moved away from its historic alliance with Russia into closer ties with Europe, with an International Monetary Fund bailout replacing earlier Russian financial help and an association agreement made to trade with the European Union.
In recent weeks, pro-Russian separatists in several regions have captured key buildings and towns.
Russia has also hiked the (historically low) price it charges Ukraine for supplying gas, and called in its neighbor's debts over previous supply. On Tuesday, Interfax news agency quoted Russian Energy Minister Alexander Novak as saying the European Union had requested gas talks on Friday.
The minor concessions offered by neighboring Russia's President Vladimir Putin, in joint talks between the leaders of Ukraine, Russia, Germany and France, appear to not have been enough to secure an extension of the ceasefire.
On Friday, July 4, the Ukrainian parliament is expected to hear the first reading of the draft of constitutional amendments – which is expected to involve a centrally-governed, unitary system, rather than the federal system which might appease some separatists.
"This is significant new news for the market, which had been running high on the assumption that four way peace talks between Russia, Ukraine, France and Germany would bring some de-escalation. This optimism was clearly mis-placed," Tim Ash, head of emerging markets research at Standard Bank, wrote in a research note.
With the collapse of the ceasefire, there is also increased worry about more sanctions being imposed by the European Union or U.S. against Russian companies and individuals.
At the moment, only a handful have faced official sanctions. However, there is evidence that some Western companies are putting off deals with Russian businesses in anticipation of further rulings.
- By CNBC's Catherine Boyle