The Effects of Geopolitical Oil Price Shocks

Guillermo Verduzco-Bustos and Francesco Zanetti

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We develop a novel instrumental variable to identify geopolitical oil price shocks arising around significant geopolitical tensions and examine their transmission to the global oil market, key U.S. macroeconomic aggregates, and cross-border spillover effects on other commodity markets, output, and inflation. Geopolitical oil price shocks resemble severe oil supply shocks, leading to production declines and a much sharper increase in oil prices than conventional shocks. They are coupled with heightened uncertainty and induce a distinct inventory response: an initial short-term decline followed by long-term accumulation, reflecting market participants' concerns about future economic and oil market conditions. The cross-border spillover effects are significant for oil-intensive commodities, and are stronger for output and inflation in oil-importing economies and for countries with low energy inventories and high energy dependency on foreign supply.

Keywords: geopolitical risk; oil price shocks; VAR model; identification; spillovers; commodity markets (search for similar items in EconPapers)
JEL-codes: C32 E22 E31 E32 Q43 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2026-04
New Economics Papers: this item is included in nep-ene and nep-min
References: Add references at CitEc
Citations:

Downloads: (external link)
https://crawford.anu.edu.au/sites/default/files/20 ... o-Bustos_Zanetti.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2026-24

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().