(Reuters] – JPMorgan analysts downgrade Russian equities after Moscow sent troops into two regions within eastern Ukraine that were considered independent.

International condemnation was sparked by Monday’s declaration of President Vladimir Putin. Sanctions could be announced by the United States and its European allies. Britain has also imposed sanctions, and Olaf Scholz, the German chancellor stopped the approval of Nord Stream 2’s gas pipeline.

JPM analysts predict further falls in Russian stock markets in the short term.

Russia’s dollar-denominated RTS stock index fell 1.7% to 1316 GMT. The MOEX, which is based on roubles, was 1.8%% lower.

“With uncertainty as high/valuations as low as we can remember and a declining investor appetite to accept Russian risk – either long or short – we move to N (neutral) on Russian within our CEEMEA allocation,” analyst Elena Jouronova said in a note.

Another downside risk is a drop in dividends. JPM said that Russia could not pay dividends to its foreign shareholders if the U.S. has a policy of isolating Russia from global markets.

JPMorgan analysts (NYSE:) wrote that the crisis in Ukraine has changed from being a background threat to becoming “a major market driver in the coming weeks”, in separate notes on Tuesday.

“The market has eliminated the possibility of defusing or de-escalating crisis without taking action.”

JPM stated that investors will become less risk-averse and deleverage from the most competitive positions as they get more risky.

The analysts stated that the rise in energy prices, as well as the dovishness of some central banks from emerging markets to counter the volatility and impact on growth due to tensions will affect fixed income in these emerging markets.