Asymmetric Spillovers and Nonlinear Linkages between Oil Prices and MENA Equity Markets: Evidence from the Crisis and Post-Crisis Periods

Abstract

This paper considers the asymmetric and nonlinear spillover dynamics among oil price shocks and MENA stock markets during the major crisis and post-crisis sub-periods of 2005–2024. By applying Time-Varying Parameter Vector Autoregressive (TVP-VAR) and Nonlinear Autoregressive Distributed Lag (NARDL) models, the study finds considerable heterogeneity in the transmission of oil shocks across countries and market regimes. The results indicate that increases in oil prices have stronger and more persistent effects on equity returns and volatility than decreases, especially during crises such as the Global Financial Crisis (2008–2009), the COVID-19 pandemic, and the Russia–Ukraine war. Moreover, spillover intensity and direction are time-varying and conditional on each country's oil dependence, market depth, and economic diversification. These findings underscore the overriding importance of energy risk management, financial diversification, and policy coordination in stabilizing MENA markets amid mounting global uncertainty.