Which Russian financial event triggered a major global market shock in August 1998?

Russia’s debt default triggered a major global market shock in August 1998.

On August 17, 1998, Russia devalued the ruble, defaulted on domestic ruble-denominated debt, and declared a moratorium on some foreign payments. The announcement marked the climax of the 1998 Russian financial crisis.

The crisis followed weak tax collection, falling commodity prices, heavy reliance on short-term government debt, and pressure to maintain the ruble’s exchange-rate band. Investors rapidly lost confidence, and the ruble fell dramatically after the authorities widened its trading range and then allowed a devaluation.

The shock contributed to the failure of Long-Term Capital Management, a highly leveraged U.S. hedge fund, although LTCM’s collapse also reflected broader market dislocation. A common error is to describe the event as a corporate bankruptcy; it was primarily a sovereign debt and currency crisis.