Global markets tumbled on Monday and are expecting a torrid day when they reopen on Tuesday amid the escalating Russian-Ukraine tensions.

Russian President Vladimir Putin on Monday signed two decrees recognizing the "Luhansk People's Republic " and the "Donetsk People's Republic" as independent and sovereign states.

Tensions have already rattled global markets this year and wiped tens of billions of dollars off the value of Russian and Ukrainian assets, and the escalation is expected to increase thus making the situation even worse. 

"It is probably an understatement to say that it will be an ugly day [on the markets] tomorrow," said Viktor Szabo, an emerging market portfolio manager at abrdn in London. "I was hoping we weren't going to get here, but this is a significant step."

Russian markets were still open when Putin announced his decision live on television following phone calls to the leaders of Germany and France.

The rouble losses reached 3.3 percent, while Moscow's stock markets plunged to their lowest level in over a year as the dollar-denominated RTS index finished the day 13.2 percent lower and the rouble-based MOEX Russian index lost 10.5 percent.

Global markets are already pricing chunky geopolitical risks, but there is scope for risk premia to rise further across all sectors if a conflict breaks out between Russia and Ukraine, Goldman Sachs strategists had said in a note on Monday.

Amid the depreciation expectations for the Russian ruble, U.S. stocks would fall more than 6 percent, and European stocks would decline more than 9 percent, the U.S. investment bank said.

Futures slump

Yields on Russia's 10-year Federal Loan Obligations, a type of coupon-bearing federal loan bonds issued by the Russian government, were expected to surge further, having hit a high of 10.6 percent on Monday. Russia has one of the biggest stockpiles of international foreign exchange reserves in the world at $630 billion, but the cost of insuring its sovereign debt against default has also soared to its highest since early 2016.

Analysts were also warning of the wider impact on global market confidence, which along with the pressures of fast-rising global borrowing costs this year, has already been hit by the tensions.

S&P 500 e-mini futures slid 1.94 percent. Dow Jones industrial average e-mini futures fell 1.63 percent, and Nasdaq 100 e-mini futures dropped 2.65 percent.

Gold and oil rise with tensions

WTI rose on the fumes of war and wasted no time reclaiming the $90 handle. Energy stocks are likely to benefit today in Asia, as will gold miners now as gold closed above $1900 for the first time since June last year.

Gold is less than a day's trade away from the June 2021 high, and Putin seems to be doing all he can to make sure that level is tested – if not broken as soon as possible, Matt Simpson, market analyst with GAIN Capital said in a note on Tuesday. 

The ability of gold to sustain and build on the break above downtrend resistance at $1845, coming from the 2020, $2075 high early this week, is a bullish development, according to the note. 

(With input from Reuters)