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Hedging oil risk: the role of energy markets in BRICS and G7 economies

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  • Rehman, Mobeen Ur
  • Nautiyal, Neeraj
  • Vo, Xuan Vinh
  • Alessa, Noha

Abstract

In this study, we investigate the safe haven and hedging properties of energy stocks in major developed (G7) and emerging (BRICS) economies against international Brent crude oil price volatility. Our results indicate energy equities offer significant short-term diversification and hedging opportunities during normal and crisis periods, though efficacy diminishes over longer horizons. Before the pandemic, Russia and South Africa exhibited long-term safe haven potential, while India and Germany demonstrated strong diversifier and hedging capabilities in the short/mid-term. To assess the robustness of our findings, we re-evaluated the oil-energy relationship during the COVID-19 crisis and found that most BRICS countries (excluding South Africa) and G7 nations (excluding the US) provide safe haven or hedging advantages in the short to mid-range. Moreover, the portfolio favors higher energy stock allocation, particularly in BRICS markets, which provide more cost-effective hedging than G7, with India being the most effective. Finally, quantile causality depicts asymmetric relationships with Chinese, Indian, and Japanese markets exhibiting stronger oil sensitivity in lower/middle quantiles.

Suggested Citation

  • Rehman, Mobeen Ur & Nautiyal, Neeraj & Vo, Xuan Vinh & Alessa, Noha, 2026. "Hedging oil risk: the role of energy markets in BRICS and G7 economies," The North American Journal of Economics and Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:ecofin:v:85:y:2026:i:c:s1062940826000781
    DOI: 10.1016/j.najef.2026.102656
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