Impact of oil price shocks on the GCC stock market -

Abstract

The year 2016 started critically for the oil market. The WTI and Brent benchmark fell to their 13 year-low, breaking the $30 per barrel resistance level. This is mainly due to the slower than expected growth of the world’s second largest economy, China. Nevertheless, the oil crisis started in September 2014. The oil prices have declined from over $100 per barrel to less than $50 per barrel in less than six months. This crisis had a severe impact on the GCC region. If the theory that oil prices have an impact on the stock market is precise, then looking at the beginning of 2016, the heavily oil-based GCC region is starting off on a worse year than 2015. This project studies the impact of oil price shocks on the GCC stock market indices over the period 12-31-2005 – 1-25-2016. After conducting all the necessary tests, the results reported by the Impulse Response Function and Variance Decomposition suggest that Brent crude price shocks have an impact on all the GCC stock market indices.