KYIV: Ukraine’s assets came under pressure on Tuesday after a sharp escalation of tensions with Russia, sending the hryvnia tumbling to levels last seen in 2015 when the country was headed for default.

Russia’s formal recognition of two breakaway regions in eastern Ukraine late on Monday has raised the spectre of war on Europe’s eastern flank and rattled global financial markets. Ukraine’s hryvnia weakened as much as 1.4% to 29.1196 to the dollar - its weakest level since the currency dropped sharply in 2015 as the country hurtled towards a debt restructuring. The currency has weakened nearly 10% since end-October, when the conflict with Moscow intensified as investors ditched Ukrainian assets amid growing concerns over a Russian troop buildup near Ukraine’s borders and fears Russia is preparing for a military attack against Ukraine. The Kremlin has denied that.

Ukraine’s dollar-denominated sovereign bonds also stumbled.