Russia has more than doubled its key interest rate after the rouble slumped by 30% amid new Western sanctions.
The Bank of Russia said it raised the rate to 20% from 9.5% to help cushion the impact of the rouble slide.
European markets fell amid fears over financial stability, with London’s FTSE 100 down more than 1% and Paris and Frankfurt about 2% lower.
The price of crude oil jumped 4.5%, and the dollar and gold rose as investors sought safer places to put their money.
The emergency rate rise by Russia’s central bank was a bid to halt the rapid depreciation in the value of the rouble against the dollar, which threatens to wipe out the currency’s buying power and destroy the savings of ordinary Russians.
It came as the UK, along with the US and EU, cut off Russia’s banks from financial markets in the West, prohibiting dealings with the central bank, state-owned investment funds and the finance ministry.
Chancellor Rishi Sunak said the measures demonstrated the UK’s “determination to apply severe economic sanctions in response to Russia’s invasion of Ukraine”.
At the weekend, Russia’s central bank issued an appeal for calm amid fears that new financial sanctions could spark a run on its banks. It said it had the “the necessary resources and tools to maintain financial stability.”
A run on Russian banks would see too many people trying to withdraw money.
Videos on social media appeared to show long queues forming at cash machines and money exchanges in Moscow, worried that their bank cards may stop working or that limits will be placed on the amount of cash they can withdraw.