On the short-term influence of oil price changes on stock markets in GCC countries: linear and nonlinear analyses

TL;DR

This study investigates how short-term oil price fluctuations influence stock markets in GCC countries, revealing significant effects in some nations and no effect in others, using both linear and nonlinear analytical methods.

Contribution

It introduces a comparative analysis of linear and nonlinear models to assess oil price impacts on GCC stock markets, highlighting country-specific responses.

Findings

Qatar, Oman, and UAE stock markets react positively to oil price increases.

Bahrain, Kuwait, and Saudi Arabia stock markets show no significant response.

Nonlinear relationships are considered to better understand market sensitivities.

Abstract

This paper examines the short-run relationships between oil prices and GCC stock markets. Since GCC countries are major world energy market players, their stock markets may be susceptible to oil price shocks. To account for the fact that stock markets may respond nonlinearly to oil price shocks, we have examined both linear and nonlinear relationships. Our findings show that there are significant links between the two variables in Qatar, Oman, and UAE. Thus, stock markets in these countries react positively to oil price increases. For Bahrain, Kuwait, and Saudi Arabia we found that oil price changes do not affect stock market returns.