IDEAS home Printed from https://ideas.repec.org/p/pre/wpaper/202609.html

The Shifting Dynamics of Energy Supply Shocks: Natural Gas as the New Driver of European Stock Market Volatility

Author

Listed:
  • Zhangying Li

    (Economics and Management School, Wuhan University)

  • O-Chia Chuang

    (School of Digital Economics, Hubei University of Economics)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

Abstract

The onset of the Russia-Ukraine war in 2022 caused significant fluctuations in global energy markets, particularly in natural gas prices, highlighting the growing importance of natural gas for financial market stability. Using a structural econometric framework, we analyze the dynamic effects of natural gas supply shocks compared to three distinct oil shocks popularly used in the energy economics literature using constant and time-varying parameter local projections model, and associated historical decomposition. Our findings reveal that supply shocks of natural gas has replaced oil as the primary driver of stock market volatility, particularly during the 2022 energy crisis. Additionally, natural gas supply shocks are found to perform better in an out-of-sample forecasting exercise compared to oil supply shocks. These results suggest the need for policymakers and investors to incorporate natural gas price dynamics into financial risk management frameworks for Europe.

Suggested Citation

  • Zhangying Li & O-Chia Chuang & Rangan Gupta, 2026. "The Shifting Dynamics of Energy Supply Shocks: Natural Gas as the New Driver of European Stock Market Volatility," Working Papers 202609, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202609
    as

    Download full text from publisher

    File URL: https://drupalwebprod-files.up.ac.za/Public/2026-04/202609.pdf?VersionId=d4eo.mTWNU0LfOTPOgb3DahMuayyowP8
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:202609. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rangan Gupta (email available below). General contact details of provider: https://edirc.repec.org/data/decupza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.