This thesis interrogates the concept that markets, in particular the Brent crude oil market, react to geopolitically risky events by evaluating the oil market's response to nuclear latency news announcements related to the Iraqi and Iranian nuclear programs from mid-1987 to early 2026. Existing literature on geopolitical risk has failed to successfully join the study of nuclear latency, a specific form of geopolitical risk, with market reactions, despite its relevance to today's economy. The conventional wisdom regarding geopolitical risk and oil market movements state that when faced with a geopolitical risk that could lead to a reduction in supply, there will be a preemptive increase in demand out of fears of a future supply reduction. The increase in demand should lead to a short-lived increase in the price of oil that will subside once the event related to the risk fails to be realized. However, through quantitative regression analysis, my study uncovers that this expected reaction isn't present when markets are presented with nuclear latency news regarding Middle Eastern nuclear programs. Oil markets do not react to oil producing states gaining nuclear latency, despite their nuclear programs being a primary risk for future conflict that could potentially disrupt oil production. I argue that this failure to react is due to nuclear latency threats not necessarily translating to a supply disruption threat, OPEC+'s ability to offset any major supply disruptions with their spare capacity, and the majority of news being focused on a political audience in terms of securitization and not financial focus. These findings further highlight the gap between academia's hyper fixation on nuclear capability and the financial world's indifference toward a proven geopolitical threat.
Megan McLaughlin (Fri,) studied this question.