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Oil Prices, Sustainability Initiatives, and Stock Market Dynamics: Insights from the MSCI UAE Index

Author

Listed:
  • Hajer Zarrouk

    (Business Department, Higher Colleges of Technology, Abu Dhabi P.O. Box 41012, United Arab Emirates
    Laboratory of International Economic Integration, Department of Economics, Faculty of Economic Sciences and Management of Tunis, University of Tunis El Manar, Tunis 2092, Tunisia)

  • Mohamed Khalil Ouafi

    (Fintech, Risk and Investment Analysis, Business School, University of Sussex, Brighton BN1 9RH, UK)

Abstract

This study examines the interplay between oil price volatility, sustainability-driven initiatives, and the MSCI UAE Index, highlighting the challenges that oil-dependent economies face in balancing financial stability with sustainability transitions. Using a dataset of 2707 daily observations from 2014 to 2024, we applied linear regression, ARCH, GARCH, and TARCH models to analyze volatility dynamics across two key periods: the 2014–2016 oil price collapse and the 2019–2023 phase marked by the COVID-19 pandemic and increasing sustainability efforts. Our findings indicate that oil price fluctuations significantly impact the MSCI UAE Index, with GARCH models confirming persistent volatility and TARCH models revealing asymmetrical effects, where negative shocks intensify market fluctuations. While the initial sustainability policy announcements contributed to short-term volatility and investor uncertainty, they ultimately fostered market confidence and long-term stabilization. Unlike previous studies focusing solely on oil price volatility in emerging markets, this research integrates sustainability policy announcements into financial modeling, providing novel empirical insights into their impact on financial stability in oil-exporting economies. The findings suggest that stabilization funds, dynamic portfolio strategies, and transparent regulatory policies can mitigate oil price volatility risks and enhance market resilience during sustainability transitions, offering valuable insights for investors, policymakers, and financial institutions navigating the UAE’s evolving economic landscape.

Suggested Citation

  • Hajer Zarrouk & Mohamed Khalil Ouafi, 2025. "Oil Prices, Sustainability Initiatives, and Stock Market Dynamics: Insights from the MSCI UAE Index," JRFM, MDPI, vol. 18(6), pages 1-24, June.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:6:p:314-:d:1674211
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    References listed on IDEAS

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