Hedge funds are scooping up Russian and Ukrainian assets after sharp declines since last autumn, while institutional investors stay clear as they view the intensifying political risks as too hot to handle.

Many big investors have become increasingly nervous about the possibility of military conflict in eastern Europe, with Moscow warning of “the most unpredictable and grave consequences” if the west rejects its security demands.

The notion that such tensions could lead to a war — and to western sanctions against Russia — has made financial assets in the region too difficult to hold for some large traditional managers, already jittery after a choppy start to the year fuelled in part by the prospect of tighter US monetary policy.