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Geopolitical risks and oil market fear: Country-specific spillover effects

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  • Xiao, Jihong
  • Zhang, Jingyu
  • Zheng, Yan

Abstract

The oil implied volatility index (OVX) is a popular measure of oil market fear. This paper uses OVX and the time-varying parameter vector autoregressive dynamic spillover index (TVP-VAR-DY) model to investigate the spillover effects between geopolitical risks (GPRs) and oil market fear. Particularly, we select GPRs across 23 developed and emerging countries instead of aggregate or categorized GPRs. Our empirical results show that the spillovers between GPRs and OVX are asymmetric, with greater spillovers from GPRs to OVX. Additionally, the spillovers from GPRs to OVX have time-varying features and present differences across countries. Finally, the US GPR consistently holds a central position in the net spillover network of GPRs and OVX across periods, with the GPRs of the UK, France, Russia, and China playing prominent roles. However, the influence of US GPR and cross-country GPR connections have both weakened after 2020.

Suggested Citation

  • Xiao, Jihong & Zhang, Jingyu & Zheng, Yan, 2025. "Geopolitical risks and oil market fear: Country-specific spillover effects," Research in International Business and Finance, Elsevier, vol. 77(PB).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925002417
    DOI: 10.1016/j.ribaf.2025.102985
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    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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