Vladimir Putin’s territorial ambitions are bumping up against financial markets.

As the Russian president plots his next move on Ukraine, investors are giving his inner circle pause for thought. Since Putin annexed Crimea in March in the teeth of international outrage, Russian stocks have become the most volatile since 2009. Swings in the ruble against the euro are now the most extreme on record while expectations for fluctuations in the currency against its emerging-market peers are at the highest in two years.

That’s making investors more reluctant to gamble on a country that is already close to a recession and dependent on natural resources to lead economic growth. While Putin is motivated more by the desire to assert his nation’s power in the world, invading eastern Ukraine would have provoked harsher international sanctions and risked accelerating the flow of money out of Russia. 

“We got to the point where the market speaks and politicians are forced to listen and adjust,” Mansur Mammadov, a money manager at Kazimir Partners Ltd. in Moscow, which oversees $300 million in emerging-market equities, said by phone on May 29. “The volatility was like a tsunami and it would be just logical to assume that it made the politicians realize the cost of Russian expansion in Ukraine was too much for the slowing economy.”

A gauge of price swings in Russian stocks jumped to a more than four-year high compared to shares of developing nations. Historical volatility for the benchmark Micex index in Moscow reached 29.7 percent on May 30, almost three times the level of the MSCI Emerging Markets Index and up from 12.7 percent at the end of February, based on three-month data compiled by Bloomberg.

Moves in the ruble also amplified after the U.S. and European Union imposed sanctions including travel bans and asset freezes on Putin allies in Russia and Ukraine. The currency’s three-month historical volatility rose to 11.3 percent from 7 percent at the end of 2013, according to data compiled by Bloomberg. That compares with 4.4 percent for the euro as the gap between the two gauges reached 6.92 percentage points on May 30, the widest since Europe’s common currency was introduced in 1999. 

A gauge of expected swings in the currency against the dollar was at the highest since October 2012 on April 25 compared with developing-country currencies such as the Turkish lira and the Chinese yuan, according to three-month implied volatility data compiled by Bloomberg and JPMorgan Chase & Co. (Bloomberg)