International military conflicts and emerging markets: The impact of the Russia-Ukraine War on Stock Markets of the World’s Largest Oil Exporting Economies.

Abstract

On February 24, 2022, Russia launched an invasion of Ukraine, initiating the beginning of the Russia-Ukraine war. On that day, major global stock indices such as the S&P 500, Stoxx 600, and FTSE 100, witnessed significant declines in their prices. While a lot of media and scholarly attention has focused on the response of the developed economies to this military conflict, the reaction of emerging markets (EMs) hasn’t been studied as extensively. The Russian crude oil industry became one of the most targeted sectors by the Western sanctions. Consequently, a group of special interest among EMs are global crude petroleum exporters. This study uses the event study methodology to analyze the impact of the start of the invasion on the stock indices of EMs in this group: Mexico, Brazil, Malaysia, Colombia, UAE, Kazakhstan, Kuwait, Nigeria, Qatar, and Saudi Arabia. It also extends the analysis to two other important events: the EU’s ban on Russian crude oil (June 3, 2022) and the oil price cap (December 2, 2022). The results of this study show that the UAE, Saudi Arabia, Brazil, and Colombia responded neutrally to all three events. Kuwait and Nigeria became the most volatile markets across the three events. Kazakhstan was the only country that reacted only insignificantly or positively to all events. These findings can help global investors identify portfolio diversification opportunities in the developing world, enabling them to achieve more stable returns.