Examining the Impact of Changes in Natural Gas, Oil, and Currency Prices on the Return of Selected Stock Market Indices

Objective In recent years, the increasing demand for energy has highlighted the importance of energy in production. As a strategic energy source, natural gas is a vital component of the production process for goods and services. On the other hand, financial markets are crucial to any country's economy, and stock exchanges are a key component of these markets. Various indices calculated on stock exchanges indicate the return and overall trend of stock prices in the entire market and specific industries. The fluctuation of each index is influenced by changes in the stock prices of companies included in the calculation. Many factors contribute to fluctuations in companies' stock prices, including the price of natural gas, which is used by various industries in their production processes. Changes in gas prices affect companies' profit margins, leading to changes in their stock prices. Ultimately, these changes impact the overall return of the capital market. Given the significance of this topic, this research examines the short-term and long-term effects of changes in natural gas prices on the return of the Iranian stock market. Methods This research is classified as applied research, employing quantitative methodology. To analyze the monthly data spanning from April 2009 to March 2022, this study utilized the Vector Autoregression (VAR) method and the Johansen Cointegration Test. Results The results confirm a long-term relationship between natural gas price changes and selected capital market indices. The Johansen Cointegration Test indicates that changes in gas prices have a negative impact on stock market indices, OTC, chemical industries, industry, cement, and petroleum products in both the short- and long-term. Furthermore, the results indicate that exchange rate changes have a positive and significant effect on capital market indices in both the short- and long-term. Finally, the test results show that oil price changes have a negative impact on indices in the short-term, but in the long-term, changes in indices will move in the same direction as oil price changes. Conclusion Considering the significant impact of gas prices on capital market fluctuations, it is recommended that the government regulate gas prices to minimize their negative effects on capital market indices. To achieve this, sudden decisions regarding gas prices should be avoided. Instead of making annual budget decisions, a dynamic gas pricing formula should be designed, allowing the price of gas offered to industries to fluctuate in response to global gas price changes. This would provide investors with the stable, long-term economic conditions they require. To promote diversification of energy consumption, the government can implement policies to increase investment in renewable and emerging energy sectors, encouraging companies to switch to alternative energy sources. This would reduce industries' dependence on gas and mitigate the impact of gas price changes on the stock market. Objective In recent years, the increasing demand for energy has highlighted the importance of energy in production. As a strategic energy source, natural gas is a vital component of the production process for goods and services. On the other hand, financial markets are crucial to any country's economy, and stock exchanges are a key component of these markets. Various indices calculated on stock exchanges indicate the return and overall trend of stock prices in the entire market and specific industries. The fluctuation of each index is influenced by changes in the stock prices of companies included in the calculation. Many factors contribute to fluctuations in companies' stock prices, including the price of natural gas, which is used by various industries in their production processes. Changes in gas prices affect companies' profit margins, leading to changes in their stock prices. Ultimately, these changes impact the overall return of the capital market. Given the significance of this topic, this research examines the short-term and long-term effects of changes in natural gas prices on the return of the Iranian stock market. Methods This research is classified as applied research, employing quantitative methodology. To analyze the monthly data spanning from April 2009 to March 2022, this study utilized the Vector Autoregression (VAR) method and the Johansen Cointegration Test. Results The results confirm a long-term relationship between natural gas price changes and selected capital market indices. The Johansen Cointegration Test indicates that changes in gas prices have a negative impact on stock market indices, OTC, chemical industries, industry, cement, and petroleum products in both the short- and long-term. Furthermore, the results indicate that exchange rate changes have a positive and significant effect on capital market indices in both the short- and long-term. Finally, the test results show that oil price changes have a negative impact on indices in the short-term, but in the long-term, changes in indices will move in the same direction as oil price changes. Conclusion Considering the significant impact of gas prices on capital market fluctuations, it is recommended that the government regulate gas prices to minimize their negative effects on capital market indices. To achieve this, sudden decisions regarding gas prices should be avoided. Instead of making annual budget decisions, a dynamic gas pricing formula should be designed, allowing the price of gas offered to industries to fluctuate in response to global gas price changes. This would provide investors with the stable, long-term economic conditions they require. To promote diversification of energy consumption, the government can implement policies to increase investment in renewable and emerging energy sectors, encouraging companies to switch to alternative energy sources. This would reduce industries' dependence on gas and mitigate the impact of gas price changes on the stock market.