The Impact of Oil Prices on GCC Stock Markets

Ing. Jasimullah Rehman Ullah

Master's thesis

Abstract:

Crude Oil is one of the main sources of Energy and it plays an important role in the world economy. The demand for Crude oil is increasing day by day and along with it the price of buying it is also increasing. In our research, we are mainly focusing on the GCC countries which plays a significant role in the Export of Crude oil. Moreover, our thesis is to see if the fluctuation in Crude oil prices has an effect on the stock market of GCC Countries or no, are they correlated to it or not. The sample period analyzed is from 2005 to 2022 and we are working on monthly, quarterly, weekly, and daily data set. Vector Autoregression model has been tested from which we came to know that in long term period (monthly and quarterly) Bahrain, UAE, Kuwait, and Saudi Arabia stock index is positively correlated with the Crude oil and for Natural Gas we found that Qatar, UAE, Saudi Arabia, and Bahrain stock index is correlated with Natural Gas. But for a short run (weekly and daily) data set all the GCC Countries are positively correlated to both Crude oil and Natural Gas. As GCC countries are highly dependent on Crude oil so I don’t think it is good for them in the future due to the crises which are happening in the world. So, there should always be another source of income from which they can survive even in a harsh situation and improve their economy.

Abstract:

Crude Oil is one of the main sources of Energy and it plays an important role in the world economy. The demand for Crude oil is increasing day by day and along with it the price of buying it is also increasing. In our research, we are mainly focusing on the GCC countries which plays a significant role in the Export of Crude oil. Moreover, our thesis is to see if the fluctuation in Crude oil prices has an effect on the stock market of GCC Countries or no, are they correlated to it or not. The sample period analyzed is from 2005 to 2022 and we are working on monthly, quarterly, weekly, and daily data set. Vector Autoregression model has been tested from which we came to know that in long term period (monthly and quarterly) Bahrain, UAE, Kuwait, and Saudi Arabia stock index is positively correlated with the Crude oil and for Natural Gas we found that Qatar, UAE, Saudi Arabia, and Bahrain stock index is correlated with Natural Gas. But for a short run (weekly and daily) data set all the GCC Countries are positively correlated to both Crude oil and Natural Gas. As GCC countries are highly dependent on Crude oil so I don’t think it is good for them in the future due to the crises which are happening in the world. So, there should always be another source of income from which they can survive even in a harsh situation and improve their economy.

Keywords

Vector Autoregression, Tadawul All Share Index, Organization of Petroleum Exporting Countries, Global Industry Classification Standard, Liquefied Natural Gas, Autoregressive distributed lag

Language used: English

Date on which the thesis was submitted / produced: 13. 5. 2022

Thesis defence

• Date of defence: 22. 6. 2022
• Supervisor: Ing. Tomáš Plíhal, Ph.D.
• Reader: Ing. Luděk Benada, Ph.D.

Masaryk University

Faculty of Economics and Administration

Master programme / field:
Finance / Finance