Which 1998 event caused global markets to plunge after Russia defaulted on domestic debt?

The 1998 event that caused global markets to plunge after Russia defaulted on domestic debt was the Russian financial crisis.

On August 17, 1998, Russia devalued the ruble, declared a moratorium on some foreign debt payments, and restructured domestic government debt. The announcement followed falling oil prices, weak tax collection, political instability, and pressure on Russia’s currency reserves.

The shock damaged confidence in emerging markets and exposed highly leveraged investors. Long-Term Capital Management, a large U.S. hedge fund, suffered severe losses as spreads and market relationships moved far beyond its models. A Federal Reserve Bank of New York–facilitated private-sector rescue followed in September.

Russia’s crisis is distinct from the 1997 Asian financial crisis, although investors connected the episodes through global risk sentiment. The Russian default was also not the same as a formal stock-exchange closure: it combined sovereign debt restructuring, currency collapse, and market contagion.