The Turkish lira dropped and stocks declined after Turkey shot down a Russian warplane near the Turkish-Syria border.
NATO member Turkey said it shot down the plane after the aircraft repeatedly violated its airspace and ignored several warnings. Russian officials denied that the plane had crossed into Turkish airspace.
The news pushed European markets lower, with stocks in Russia and Turkey hit the most.
The lira shed nearly 1% against the dollar. The currency has already fallen by about 19% against the dollar this year, making it one of the worst performing emerging market currencies. Stocks at the Borsa Istanbul shed 1.4% on Tuesday.
The Russian ruble dipped 0.2% against the dollar.
“The incident is undoubtedly significant and the markets have already reacted — the lira and the ruble, as well as both countries’ stock markets are down,” said Liza Ermolenko, emerging markets economist at Capital Economics.