Geopolitical crises, financial markets, and intraday volatility spillovers

This paper examines intraday volatility spillovers in global financial markets in the context of recent geopolitical crises. We extend the intraday volatility spillover index (IVSI) framework to analyze high-frequency transmission patterns across financial markets during two recent geopolitical events, Russia-Ukraine war and the Israel-Hamas conflict. Our findings reveal that the Russia-Ukraine war significantly amplified volatility spillovers, particularly during periods of heightened market stress. In contrast, the Israel-Hamas conflict exhibited more limited spillover effects. Notably, we observe that geopolitical risk surged prior to February 2022, suggesting that markets had partially priced in the impending conflict. To capture nonlinear dynamics under varying risk conditions, we further employ a quantile vector autoregression (QVAR) model, which uncovers asymmetric spillover patterns across quantiles. These results underscore the importance of accounting for both the intensity and nature of geopolitical shocks when assessing financial contagion in high-frequency environments.