Putin threatened Western powers with unprecedented consequences if they interfere in Ukraine. 3 strategists break down what that could mean for markets.

• Russia's invasion of Ukraine sent financial markets and oil prices into a tailspin this week.
• Markets were already vulnerable, weighed by elevated inflation and coming interest rate hikes.

Vladimir Putin on Thursday issued a dire warning to the US and other Western powers against interfering in its actions in Ukraine, threatening consequences that he said would be worse than they've ever seen in history.

Russia's attack on Ukraine this week didn't just send chills among people watching in fear around the world, but also dealt a major blow to financial markets.

Global stocks tumbled, oil surged to $100 a barrel for the first time since 2014, and risk assets came under pressure. All of this happened within a day of Putin's recognition of independence for two breakaway regions in Ukraine—further heightening tensions in the region.

Markets were already in correction territory as investors were pricing in a combination of tightening monetary policy, a slowing US economy, rising interest rates, and high inflation. So Russia's invasion of Ukraine adds another risk element to near-term volatility.

Three strategists broke down what Putin's threat to Western powers could mean for markets in the near-term:

Cyberwar and impact on commodities

Some think Putin's use of the phrase "never seen in history" might imply use of nuclear weapons. But in all likelihood, he might be referring to cyberattacks, according to Charles Schwab's chief global investment strategist, Jeffrey Kleintop.

"Russia has been at the forefront of cyberattacks in the US and Europe for some time," he said. "His comment may also imply cutting off energy and gas supplies to Europe."

Kleintop said a wider war involving NATO or the US is highly unlikely, with major powers making it clear this isn't on the cards. Outside of the energy industry, Russia and Ukraine are relatively small countries from an economic point of view, he added.

Both economies account for less than 2% of world GDP, so non-energy and commodity-related impacts on the global economy and financial markets are expected to be limited.

Oil could swing back to $95 by Q4

Russia is Europe's largest oil exporter, and has been a reliable supplier, even at the height of the Cold War. Large euro countries such as Germany and Italy are most exposed to Putin's threats, given their greater reliance on Russian energy.

But this picture could look different if Russia ends up taking retaliatory steps.

Tangibly, a short-term disruption of Russian export volumes to Europe and the US would likely see Brent average $115 a barrel in the second quarter, $105 a barrel in the third quarter, and $95 a barrel by the fourth quarter, JPMorgan strategists said Wednesday.

Further pain only if the US is drawn in directly

Given investors don't like uncertainty, the downturn in stock markets hasn't really been surprising. Morgan Stanley said this week that the markets have priced in most of the bad news from the crisis. What's more, US President Joe Biden has vowed American troops will defend, and not engage with Russia, in Ukraine.

Dave Sekera, Morningstar's chief US market strategist, said heightened sanctions by themselves wouldn't meaningfully impact the long-term earnings potential of US companies.

"The greatest risk in our view is if the US were to be drawn directly into the conflict," he said. "If that were to happen, we expect that markets would take another leg down, as negative investor and consumer sentiment would pressure US markets and economic growth."

Most analysts seem to think that sanctions, which so far have been targeted at specific Russian financial institutions and individuals, will be limited in their impact.

"Despite the large human and geopolitical implications of this crisis, western politicians and societies may not have the stomach for energy shortages combined with prices that are even higher than today's already elevated levels," said Colin Dryburgh, investment manager at Aegon Asset Management.

"Higher energy costs are effectively a tax on consumption and could lead to recession. Should the West's response not involve significant economic self-harm, then financial markets may well reverse some of the recent extreme moves that have occurred."