Impact of US–Iran Diplomatic Relations on Global Oil and Financial Markets: A Data Analytics Perspective

This research paper investigates the impact of US–Iran diplomatic relations on global oil prices, financial market volatility, and emerging economy stability through an integrated data analytics framework. Using monthly and event-based datasets from 2003–2023, the study combines econometric modeling, event study methodology, correlation analysis, ARIMA/ARIMAX forecasting, and machine learning techniques to quantify the geopolitical risk premium embedded in global energy markets. The research demonstrates that diplomatic escalation events between the United States and Iran significantly increase Brent crude prices, elevate financial market volatility, and negatively affect global equity performance, while normalization events such as the JCPOA agreement reduce oil price volatility and improve investor sentiment. Statistical findings confirm that the Geopolitical Risk (GPR) Index is a significant predictor of oil price dynamics and materially improves forecasting accuracy when incorporated into ARIMAX models. The paper further evaluates the macroeconomic implications for Pakistan as a vulnerable oil-importing developing economy, estimating the effects of oil price shocks on inflation, import costs, foreign exchange reserves, and current account stability. Scenario modeling reveals a substantial geopolitical risk spread between escalation and normalization pathways, highlighting the economic importance of diplomatic stabilization in the Middle East. The study contributes to the intersection of geopolitical economics, financial analytics, and energy market forecasting by proposing an original Geopolitical-Market Sensitivity Index (GMSI) and providing policy recommendations for governments, investors, and financial institutions. Keywords: Geopolitical Risk, Brent Crude Oil, Financial Markets, ARIMA Forecasting, Pakistan Economy, Oil Price Volatility, Data Analytics, US–Iran Relations, GPR Index, Energy Economics.