Geopolitical risk spillovers among GCC stock markets, non-renewable energy, and gold: evidence from a quantile connectedness approach

Abstract Evaluating systemic risk transmission across financial and commodity markets is vital for maintaining macroeconomic stability in hydrocarbon-dependent economies. This study investigates the propagation of geopolitical risk across Gulf Cooperation Council equity markets, non-renewable energy commodities (crude oil and natural gas), and gold. Employing a quantile vector autoregression connectedness framework on daily data from January 2022 to February 2024, static and dynamic spillovers are evaluated across normal (50th quantile), bearish (5th quantile), and bullish (95th quantile) market regimes. To address differences in trading calendars, the analysis considers two alignment procedures: a continuous daily panel with last-observation-carried-forward (LOCF) imputation and a robustness sample limited to dates when all markets are open. Empirical findings reveal pronounced state dependence in shock transmission: the Total Connectedness Index surges from 72.35% under normal conditions to 82.99% during downside distress and remains elevated at 79.97% during bullish regimes. The Saudi Tadawul All Share Index is a net transmitter of shocks across all specifications and market states, although it is not consistently the largest transmitter under every calendar, particularly in the All-Markets-Open upper-tail results. Geopolitical risk emerges as a major net transmitter during market downturns under both calendar specifications, while crude oil is an important transmitter under the LOCF calendar but becomes a net receiver when the sample is restricted to common trading days, indicating that this particular finding is sensitive to the calendar-alignment procedure. Conversely, gold functions predominantly as a net shock receiver across all regimes. These results demonstrate that geopolitical shock transmission across financial and commodity markets is inherently non-linear and tail-dependent, providing actionable insights for cross-asset hedging, portfolio risk management, and macroprudential surveillance.