ABSTRACT

This research examines the relationships between the Geopolitical Risk Index, the oil price and the stock markets of the five largest oil exporters (Saudi Arabia, Canada, Russia, the United States and the United Arab Emirates) and oil importers (China, the United States, India, South Korea and Japan). The analysis uses monthly data for the period between January 1985 and August 2023. Significant results were obtained in the study using the Toda Yamamoto (TY) causality test and the Fourier Toda Yamamoto (FTY) causality test. According to the results of both causality tests, there is unidirectional causality from the stock market to the oil price in oil-exporting countries, while generally no causality was found between financial markets and oil prices in oil-importing countries. The results show that there is a unidirectional causality from the geopolitical risk index to the oil price in oil-exporting (Canada and the US) and oil-importing (the US, South Korea and Japan) countries, and that geopolitical risks provide predictive information for oil prices. In addition, these findings provide important information for investors in terms of diversification opportunities and strategic decisions.