The Russian invasion of eastern Ukraine shook financial markets Tuesday as President Biden and Western allies announced severe penalties on Russia’s economy and key oligarchs. 

Stocks fell and energy prices rose as Wall Street braced for the economic fallout of war in Eastern Europe.  

The Dow Jones Industrial Average closed with a loss of 482 points Tuesday, ending the day down 1.4 percent after falling as much as 700 points earlier. The Nasdaq composite closed down 1.2 percent, and the S&P 500 index fell 1 percent on the day. 

While stocks pared back some of their losses before the market closed Tuesday, oil and natural gas prices did not fare as well for consumers. The price of a barrel of West Texas Intermediate crude oil for March delivery hit $92 on Tuesday, rising roughly 1.2 percent after falling earlier in the week. 

“The conflict between Russia and Ukraine has led to a sharp sell-off in stocks and bonds. Investors are de-risking as the situation escalates and uncertainty builds regarding the path forward,” wrote Lindsey Bell, chief markets and money strategist at Ally Bank. 

“Markets are likely to be on edge for the next several weeks. It’s typical that the immediate reaction to geopolitical events is the most dramatic.” 

Stocks began selling off Tuesday after Russian President Vladimir Putin ordered military forces into eastern Ukraine.

Putin on Monday recognized the so-called Donetsk People’s Republican and Luhansk People’s Republics — two areas of Ukraine controlled by Russian-backed separatists — as independent, which U.S. officials deemed a pretext for a full-scale invasion of the country. 

Biden and Western allies pledged to impose strict sanctions on Russia if Putin invaded and followed through with unprecedented limits on the Russian economy. 

The president announced Tuesday the U.S. would penalize the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB) — two state-owned banks that fund Russian economic development projects and defense, respectively. The sanctions apply to 42 of their subsidiaries. 

Biden is also targeting three Russian oligarchs with close ties to Putin and imposing a total ban on the purchase and sale of Russian sovereign debt in the U.S. financial system. 

The individuals and businesses targeted by Biden will have all U.S.-based assets frozen and will be banned from the U.S. financial system. U.S. individuals and businesses are also banned from any financial relationships with the targeted entities. 

“We have no intention of fighting Russia. We want to send an unmistakable message, though, that the United States together with our allies will defend every inch of NATO territory and abide by the commitments we made to NATO,” Biden said. 

Biden’s announcement followed similar moves from European partners.  

German Chancellor Olaf Scholz moved to block the approval of the Nord Stream 2 natural gas pipeline between his nation and Russia. The United Kingdom also imposed sanctions Tuesday on some Russian banks and individuals, and European Union officials said they would soon follow suit. 

The new sanctions go well beyond previous financial penalties imposed on Russia. However, the U.S. did not impose broader penalties on the Russian oil and gas sector, nor did the country take steps to completely isolate Russia from the global financial system. 

But on Tuesday, Biden warned U.S. sanctions would escalate in coordination with European allies should Putin’s military campaign expand in Ukraine.  

“We’re going to judge Russia by its actions, not it’s words. And whatever Russia does next, we’re ready to respond with unity, clarity and conviction,” Biden said. 

Russia does not have deep economic or financial ties with the U.S., but rising tensions could still strain American pocketbooks given the country’s immense impact in global energy markets.  

Russia was the third-biggest supplier of foreign petroleum for the U.S in 2020, according to the U.S. Energy Information Administration. The country was responsible for 7 percent of imported oil. Russia also exported $13 billion in mineral fuels to the United States in the previous year, more than half of all goods sent to America. 

Biden warned the conflict could put even more pressure on gasoline and oil prices, which rose more than 30 percent each over the past year amid the global rebound from the coronavirus recession. The president said the U.S. would take steps to try to limit the impact on U.S. households, but he admitted it would be difficult. 

“Defending freedom will have costs for us as well, and here at home. We need to be honest about that. But as we do this, I want to take robust action to make sure the pain of our sanctions is targeted at the Russian economy not ours,” Biden said.