How do commodity futures respond to Ukraine–Russia, Taiwan Strait and Hamas–Israel crises? – An analysis using event study approach

António Miguel Martins

Studies in Economics and Finance, 2024, vol. 42, issue 2, 201-217

Abstract: Purpose - The purpose of this study investigates the short-term market reaction of three commodity futures indices for four recent events of high geopolitical risk: the Ukraine–Russia war, the Taiwan Strait crisis and the Hamas terrorist attack on Israel. Design/methodology/approach - The author examines three commodity futures indices at and around the beginning of four recent events of high geopolitical risk using an event study methodology. Findings - The results show a positive abnormal return for the commodity futures indices for three of the four recent events considered in the analysis. The exception in terms of abnormal returns observed is the visit of US Speaker of the House Nancy Pelosi to Taiwan on August 2, 2022, which resulted in statistically significant negative abnormal returns in the commodity futures around the visit. The other three geopolitical events, by causing an increase of uncertainty level and supply-side constraints, led to a rise in the price of most commodity futures. This allowed commodity-exporting countries to achieve positive and statistically significant abnormal returns. Policy implications of our findings are discussed. Originality/value - The effect of high geopolitical risk events on commodity futures indices has been relatively little examined in the financial theory. This study intends to fill this gap in the literature.

Keywords: Event study; Commodity futures; Stock market reaction; Geopolitical threats (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-03-2024-0140

DOI: 10.1108/SEF-03-2024-0140

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