Changes in Crude Oil Price under the Russia-Ukraine Conflict and Dynamics of Stock Market in G7 Countries

Wei Zhao

doi:10.54097/hbem.v8i.7227

Authors

Wei Zhao

DOI:

https://doi.org/10.54097/hbem.v8i.7227

Keywords:

Russia-Ukraine Conflict, Stock Market, VAR model, ARMA-GARCH-X model.

Abstract

On 24 February 2022, the conflict between Russia and Ukraine, due to the war, caused the stock market with greater sensitivities to the change of crude oil prices. This paper studies the effect of crude oil on G7 countries’ stock markets before and after the Russian-Ukrainian conflict. Using a VAR model, impulse response plots are constructed to measure the extent of crude oil price impacts on stock prices in seven countries, and an ARMA-GRCH-X model is applied to measure the correlation between the prices of crude oil and stocks in seven countries. This study shows that variations in crude oil prices have the greatest influence on the stock markets of France, German, and Italy, with the UK following. The impact on the stock markets of Japan, Canada, and the US is relatively small. The results of the ARMA-GARCH-X model examination demonstrate that the prices of crude oil have a remarkable positive correlation with the stock markets of France, Germany, and Italy. This study shows that during the Russia-Ukraine conflict, stock markets were more influenced by the prices of crude oil and stock investors are advised to invest with caution during war.

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