Resilience and performance of Islamic and conventional banks amid oil price uncertainty

The influence of religiosity on stock price performance continues to be a subject of debate, particularly in dual banking systems, where Islamic banks (IBs) operate alongside conventional banks (CBs). This study uses an extensive dataset and applies a recursive window-based asymmetric VAR-GARCH-in-mean-BEKK model to examine the impact of oil price uncertainty (OPU) on IBs and CBs' stock returns in net oil-exporting (Egypt, Indonesia, Kuwait, Nigeria, Oman, Qatar, Saudi Arabia, and the UAE) and oil-importing (Bangladesh, Jordan, Pakistan, and Turkey) countries. Although the findings provide partial insights into IB resilience, they are inconclusive enough to holistically confirm the superiority of either IBs or CBs. This study contributes to the existing literature and emphasizes the need for further investigation of these dynamics. Understanding the effect of OPU on bank profitability is essential for long-term investors, policymakers, and those involved in regulatory reforms focused on promoting economic growth, profitability, and risk management within a dual banking system. • Oil price uncertainty depreciates bank returns more in oil-exporting countries. • Oil uncertainty increases Islamic bank (IB) returns in Egypt, Bangladesh, and Turkey. • IB returns in Nigeria and Saudi Arabia drop the most among oil-exporting countries. • IB returns in Jordan and Pakistan decrease the most among oil-importing countries. • Instability in oil prices leads to unpredictability in IB stock prices.