Stock Market Returns and Crude Oil Price Volatility: A Comparative Study Between Oil-Exporting and Oil-Importing Countries

This study employs a modern GARCH framework to conduct a comparative analysis of the volatility transmission between crude oil prices and a comprehensive set of financial assets, including sectoral equities, precious metals, and cryptocurrencies, across oil-exporting and oil-importing countries. Our central finding reveals a stark pre-pandemic dichotomy: before COVID-19, oil price volatility exhibited a significant positive correlation with nearly all sectoral stock returns in oil-exporting countries (the United States and Canada), reflecting a systemic, demand-driven linkage. In contrast, this relationship was largely insignificant in oil-importing countries (the United Kingdom, France, and Japan), with the exception of the energy sector. The COVID-19 crisis temporarily erased this fundamental distinction, as sectoral stock markets in both country groups moved in significant positive correlation with oil, driven by the synchronized global demand shock. This transition underscores that the oil–equity relationship is structurally determined by a country’s net oil trade position, a dynamic that can be overridden during systemic global crises. These findings offer crucial insights for international portfolio diversification and risk management.