Oil prices versus global Islamic indices: evidence from S&P sectoral stock indices

Purpose This study aims to examine the time-varying dynamic dependencies between crude oil returns and global Islamic S&P sectoral stock indices, specifically focusing on the sectors most affected by the COVID-19 pandemic. Design/methodology/approach The analysis spans from 2008 to 2022, using continuous wavelet transform (CWT) and wavelet coherence analysis to capture multi-scale co-movements across short, medium and long-term horizons. Findings Results reveal that the relationship between crude oil prices and global sectoral stock index returns is scale-dependent and time-varying. Strong correlations are observed in most sectors, particularly energy and industrials, whereas the real estate sector exhibits a unique decoupling behavior. Notably, crude oil plays a crucial role in mitigating sectoral portfolio performance with the real estate sector exhibiting the lowest risk when exposed to crude oil fluctuations. Originality/value Unlike previous studies that focus on aggregate Islamic market indices, this paper provides a granular analysis of sector-specific vulnerabilities. It contributes to the literature by identifying the distinct “safe-haven” potential of Islamic real estate during energy shocks and offering tailored portfolio diversification strategies for investors during periods of extreme market disruption like the COVID-19 pandemic.