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Dynamic spillovers between Chinese oil futures market and global financial markets under geopolitical risks

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  • Zhang, Weiqian
  • Li, Songsong
  • Romanova, Valentina
  • Xu, Nan

Abstract

Based on the direction and scale of the correlation between markets, this study analyzes the correlation between price fluctuations in the Chinese crude oil futures market and global financial markets under the influence of geopolitical factors. Firstly, we employ the Mann-Kendall method to identify abrupt change points of geopolitical risks and divide the study time period into different geopolitical risk stages. Next, we conduct a statistical analysis of the correlation direction of price fluctuations between the Chinese crude oil futures market and global financial markets during different stages of geopolitical risk using the VAR-BEKK-GARCH model. Additionally, we analyze the correlation between the Chinese crude oil futures market and global financial markets using the TVP-VAR-DY spillover index model and the volatility spillover network. Finally, based on the BK spillover index model, we investigate the dynamic spillover effects between the Chinese crude oil futures market and global financial markets from a frequency domain perspective. The results confirm the significance, time-varying and heterogeneous characteristics of geopolitical risk on the Chinese crude oil market and major international financial markets. The risk spillover of Chinese crude oil futures to major international financial markets under geopolitical risk is mainly concentrated in the short and medium term. The contribution of this article is the scientific division of geopolitical risk stages and the analysis from the perspectives of time and frequency domain. The interdependence between Chinese crude oil futures market and major international financial markets could confirm the role of Chinese crude oil futures market in the global market, and explore the spillover paths of global financial risks and the mechanisms.

Suggested Citation

  • Zhang, Weiqian & Li, Songsong & Romanova, Valentina & Xu, Nan, 2025. "Dynamic spillovers between Chinese oil futures market and global financial markets under geopolitical risks," Energy, Elsevier, vol. 326(C).
    • Handle: RePEc:eee:energy:v:326:y:2025:i:c:s0360544225019164
    DOI: 10.1016/j.energy.2025.136274
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