Gold surged to the highest since September 2020 after Russian forces attacked targets across Ukraine, triggering the worst security crisis in Europe since World War II and crushing risk sentiment. 

President Vladimir Putin vowed to “demilitarize” Ukraine and replace its leaders. The European Union, U.S. and U.K. promised more sanctions they said would hit Russia’s economy and financial sector hard. 

The move sparked a flight to haven assets, with global stocks tumbling while bonds and oil soared. Gold jumped the most in almost two years, even as the dollar strengthened. Bullion priced in euros hit an all-time high.

“Markets are in full risk-off mode this morning,” said Paul Wong, market strategist at Sprott Asset Management. Surging oil and grains prices have also increased the possibility of “stagflation,” or a period of low or stagnant growth and high inflation, which is positive for bullion, according to Wong.

Bullion has risen in recent weeks as Moscow’s standoff with the West intensified, helping to offset other headwinds like the U.S. Federal Reserve’s policy tightening that was expected to weigh on the metal. Analysts will now be forced to look carefully at their price forecasts for the year.

We “expect that gold prices break through US$2,000/oz in the coming days if the conflict further escalates,” Bernard Dahdah, senior commodities analyst at Natixis SA, wrote in a note. “A quick correction will ensue once the conflict’s intensity winds down.”

Spot gold jumped as much as 3.4 per cent to US$1,974.34 an ounce, and traded at US$1,927.64 at 10:43 a.m. in New York. 

Other precious metals also gained, with palladium rising as much as 9.5 per cent to its highest since July on concerns over potential supply disruptions. Russia produces about 40 per cent of the palladium mined globally. Silver and platinum also rallied, while the Bloomberg Dollar Spot Index rose 1.3 per cent.