Zelensky is addressing the nation (he does so nightly):

  • says Russian forces could use chemical weapons and Ukraine takes that threat seriously

UK Defence Ministry:

  • “Russian forces prior use of phosphorous munitions in the Donetsk Oblast raises the possibility of their future employment in Mariupol as fighting for the city intensifies,”

This unverified report in UK media:

Use of chemical weapons would be a huge escalation. The  Wall Street  Journal reported back in March (post is here) that::

  • During the 2020 campaign Mr. Biden promised to work toward a policy in which the sole purpose of the U.S. nuclear arsenal would be to deter an enemy nuclear attack.
  • Mr. Biden’s new decision, made earlier this week under pressure from allies, holds that the “fundamental role” of the U.S. nuclear arsenal will be to deter nuclear attacks.
  • That carefully worded formulation, however, leaves open the possibility that nuclear weapons could also be used in extreme circumstances to deter enemy conventional, biological, chemical and possibly cyber attacks, said the officials.

From a purely financial markets perspective, such an escalation would appear to be a negative for 'risk' assets.

Lord of gas putin meme