The Russian ruble has fallen sharply against the US dollar, with a 0.7 per cent slide. Meanwhile, Moscow's MICEX index dropped by 0.9 per cent after the announcement.
Ukrainian President Petro Poroshenko said the renewed hostilities were intended to "liberate our land". Ukraine's government has, so far, resisted the Kremlin's calls for an extension of the 10-day ceasefire.
Poroshenko said the opportunity to enact a peace plan had been lost thanks to the "criminal activities" of the rebels. The east of the country has seen a host of buildings and towns occupied in defiance of the Ukrainian government.
EU leaders have been lobbying Russia to use its considerable influence to put a stop to the violence. Both the EU and the US have threatened further sanctions against Russian individuals and businesses if the situation continues to escalate.
Russian President Vladimir Putin had previously called on the Organisation for Security and Cooperation to play an active role in overseeing the truce.
However, despite the recent turmoil, European markets were trading higher this morning, with investors cheered by upbeat Chinese economic data.