Shock Absorbers or Amplifiers? How Do Firms Transmit Shocks in a Polycrisis Era?

ABSTRACT We explore how fluctuations in global oil prices and geopolitical tensions reshape the spread of financial risk among firms worldwide. We separate these shocks into short‐, medium‐ and long‐term effects using oil price data and a global political risk index. We demonstrate that major events like COVID‐19 and the Russia–Ukraine conflict contributed significantly to escalated cross‐border risk propagations. Energy‐exporting countries such as the United Arab Emirates became central to the global risk network due to their role in energy markets. Interestingly, long‐term shifts in oil prices and political risks are the main drivers of rising firm‐level risk spillovers, while short‐ and medium‐term changes help offset some of the risk. Geopolitical tensions have a stronger impact on energy firms than oil price changes. Developed‐country firms show stronger, more significant responses to oil and geopolitical shocks than developing‐country firms. Strong firms can reduce some risk spillovers, but this effect weakens during prolonged geopolitical or energy shocks.