Financial stress, lithium prices, and renewable energy nexus in times of geopolitical crisis: A time-frequency analysis

In recent years, renewable energy markets have demonstrated remarkable resilience and growth, emerging as a key alternative to traditional energy sources. However, their stability and performance under geopolitical uncertainty remain a critical area of investigation. This study contributes to the literature by analyzing quantile-based time-frequency correlations among financial stress (FSI), lithium prices (LPR), and renewable energy returns (RER) across the Russia-Ukraine and Israel-Hamas conflicts. For this purpose, the investigation applied the Wavelet Quantile Correlation, QARDL, and TVP-VAR models. The study found that during the Russia-Ukraine conflict (phase I), RER negatively correlates with FSI at middle frequencies at extreme quantiles, though at higher frequencies this correlation becomes positive. Conversely, during phase II, RER shows positive comovement with FSI at low and middle frequencies across extreme quantiles; however, at higher frequencies, RER negatively correlates with FSI at lower and middle quantiles. Moreover, the FSI positively correlates with RER during the Israel-Hamas conflict across all frequencies and quantiles. During the Russia-Ukraine conflict (phase I) and the Israel-Hamas conflicts, at higher frequencies, LPR exhibits a positive correlation with RER at all quantiles, indicating investor confidence in renewable energy technologies during geopolitical instability. However, during phase II, LPR is negatively associated with RER at higher frequencies across the median and higher quantiles. Likewise, at lower frequencies, LPR negatively comoves with RER at extreme quantiles during both phases. Though this correlation was positive across all quantiles during the Israel-Hamas conflict. The QARDL and TVP-VAR models also endorse these findings. The study suggested strengthening financial stability frameworks and ensuring steady access to critical minerals, such as lithium, to reduce volatility in renewable investments and sustain the clean energy transition during geopolitical crises.