Polytomic Spillover Dynamics between Oil and Euro Markets: A High-Frequency Perspective

This study examines the short-term contagion relationship between crude oil prices and the Euro exchange rate for the period 2020–2024, a time marked by COVID-19-related shocks and economic volatility. Employing a wavelet-based framework—including phase difference, gains, coherence, correlation, and causality measures, alongside bootstrapping and red noise surrogate testing—the research captures dynamic interactions across time and frequency domains. The results reveal a significant spillover mechanism between commodity and foreign exchange markets during turbulent periods, highlighting the importance of volatility and market dynamics in risk hedging strategies. Notably, contagion effects intensify amid heightened uncertainty, underscoring the value of nuanced modeling beyond binary frameworks. The study demonstrates time-frequency variations in the WTI-Euro relationship, suggesting that polytomous analysis yields more realistic insights than dichotomous approaches. These findings underscore the need for policymakers to monitor intermarket linkages, especially during systemic shocks. By focusing on the highly unstable 2020–2024 period, characterized by supply-demand disruptions and geopolitical tensions, this study contributes to the literature by offering a detailed assessment of high-frequency interactions. The insights are particularly relevant for Europe—a major net oil importer—and provide practical implications for investors, portfolio managers, and policymakers engaged in short-term trading and risk mitigation within increasingly interconnected financial markets.