The conflict in the Ukraine is relevant to global investors as it directly affects security in Europe, which is the home of an economy the size of the U.S. The trade bans due to conflict-driven sanctions involve many countries and add to the European deflation at present. Those trade bans might get wider should the conflict intensify based on the realization that a political solution would not give the rebels and their Russian backers what they want — enough autonomy to keep Ukraine out of the EU and NATO. I do not follow this conflict to determine who is right or wrong but to gauge how it affects financial markets. Most of my conclusions may seem relevant only to institutional investors that deal in currencies, sovereign bonds, credit-default swaps (CDSs), and the energy markets, but I do believe those geopolitical developments affect quite a few individual investors, even those in the U.S. Last week the Ukrainian truce barely took hold when fighting over the strategic Ukrainian town of Debaltseve, which controls rail lines linking Luhansk and Donetsk, threatened to unravel the ceasefire agreement. The rebels decided to take the town "no matter what," as a prolonged truce made it necessary for them to control logistics in their territory. It has been clear for a long time that Ukraine is a divided country where half the population supports the rebels and the other half supports the government in Kiev — as demonstrated by this map of the 2010 election, which brought Yanukovych to power. This map also suggests this conflict can quickly carry all the way to Odessa, which Russian ruler Catherine the Great (1729-1796) turned into akey trading hub for the Russian Empire. There is also an unhappy minority of Russians in a strip of Moldova adjacent to Ukraine, where Russian peacekeepers have been stationed for years. It is entirely possible they see this conflict as the opportunity to resolve their situation once and for all. Perhaps because of all of the above considerations, Ukrainian government bonds are at all-time lows. When such a bear market in credit gets to prices like 44 cents on the dollar, this is the bond market saying that Ukraine will likely default. I am not sure the IMF would be putting more funds in a country that is in the middle of an intensifying civil war. The inversion between the one-year and five-year Ukrainian CDS has continued to widen past 2700 basis points, indicating rising chances of a sovereign default in 2015. CDSs act like leveraged put options on bonds. To try to simplify this comparison, one can say it looks like an options skew before an earnings announcement when investors are bearish on the prospects of a company meeting consensus estimates. In such a situation, investors cause the puts to be much more expensive than the calls before the earnings announcement. This CDS inversion is similar to a "put skew" in equities. The Ukrainian Hryvnia (green line) has collapsed, and at last count is changing hands at 33.50 to the dollar (before this mess started, it was at 8 to the dollar). There is no telling where the currency is going. In order for it to stabilize, this conflict has to be over — and it is not close to being over yet. Currencies have this amazing ability to spiral out of control, resulting in a negative feedback loop where weakness in the currency causes more inflation, which causes more weakness in the currency. George Soros, who has managed to capitalize on more than one of these "loops," calls this "reflexivity." Such reflexivity is likely to continue to play itself out until we know for sure how this mess is going to be resolved. At this point, it is uncertain if this conflict resolution will arrive in 2015, or later. Practical considerations for individual investors While the above insights may seem esoteric to some and only relevant to institutional markets like CDSs, currencies and sovereign bonds, they do affect individual investors, in my opinion. I think this geopolitical situation is bearish for the euro, as it adds to the deflation and economic stagnation in the eurozone via trade bans. The euro has another leg lower as I write this, flirting with 2015 lows, but it is becoming increasingly clear that parity is in the cards this year. Let's not forget that it has been as low as 83 cents since it became a "paper currency." In a deflationary situation counterbalanced by intensifying QE from the ECB, the euro can decline well below parity. A popular ETF that tracks the euro is the Currencyshares Euro Trust FXE, -0.87%even though there are leveraged ones like the Proshares Ultrashort EuroEUO, +1.83% and its leveraged bullish antithesis from the same ETF family. Keep in mind that leveraged ETFs are not really buy-and-hold instruments, but rather trading vehicles that an investor should consider liquidating quickly if the trade goes against you. Keep that in mind when trying to get in front of a move in the euro. Very few investors know how to handle leverage. This is the reason why so few people make good futures traders. This currency implication is relevant for all ADRs denominated in euros as well as any mutual fund that invest in debt and equity securities in the eurozone — they are all swimming against the current. A 20% move in the dollar against them would mean that they need a 20% rise in the EUR-denominated asset to stay flat. If the asset does not rally you can lose money, even if it stays flat in the local market. Not enough U.S.-based investors realize this by staying diversified in the eurozone and by hunting for "values" there. There is also an implication for the price of oil. The premium of Brent over WTI futures prices nearly disappeared in this price decline in the latter part of 2014, but that pricing gap had dramatically widened in 2015, where Brent is over $60/bbl on the April futures as I write this, while WTI April futures are below $50. I think this is the futures market predicting that Brent will be in shortage due in part to the likelihood of disruptions because of a possible escalation of the Ukrainian conflict. Ivan Martchev is an investment specialist with institutional money manager Navellier& Associates . The opinions expressed are his own. He doesn't hold positions in any investments discussed here. Navellier and Associates doesn't hold positions in investments mentioned in this article. This is neither a recommendation to buy nor sell the stocks mentioned in this article. Investors should consult their financial adviser before making any decision to buy or sell the aforementioned securities. Investing in non-U.S. securities including ADRs involves significant risks, such as fluctuation of exchange rates, that may have adverse effects on the value of the security. Securities of some foreign companies may be less liquid and prices more volatile. Information regarding securities of non-U.S. issuers may be limited.