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Denise Rößler

9 January 2024
Economic Bulletin Issue 8, 2023
The reaction of oil prices to geopolitical shocks depends on the country of origin. Empirical analysis suggests that instances of rising geopolitical tensions generally put downward pressure on oil prices, reflecting weaker global demand on the back of lower economic activity. However, geopolitical events in some major oil-producing countries may lead to increases in oil prices amid expectations by market participants of disruptions to future oil supply. Oil price pressures arising from these adverse shocks are typically short-lived and disappear after one quarter. However, recent heightened geopolitical uncertainty stresses the need to identify the nature of these shocks to disentangle their effects on oil prices and inflation.
JEL Code
Q02 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→General→Global Commodity Markets
F01 : International Economics→General→Global Outlook
F51 : International Economics→International Relations, National Security, and International Political Economy→International Conflicts, Negotiations, Sanctions