Which event triggered the 1998 global market turmoil after Russia stopped defending the ruble?

Russia’s default on domestic debt triggered the 1998 global market turmoil after the country stopped defending the ruble.

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 crisis spread beyond Russia because international investors and banks held Russian assets or had exposure through derivatives and emerging-market funds. The collapse of Long-Term Capital Management in the United States soon afterward illustrated how losses in one market could threaten highly leveraged global financial institutions.

Russia’s episode is distinct from the 1997 Asian financial crisis, although both involved severe currency and debt stress. The ruble crisis also differed from a conventional stock-market crash because the initial breakdown centered on sovereign debt and exchange-rate policy rather than one exchange’s trading session.