The Reaction of Oil Price to COVID-19 and to the Russia-Ukraine War: A Comparative Analysis

Objectives: This paper compares the reaction of crude oil futures prices to the Russia-Ukraine war and COVID-19. It also examines how oil markets perform in comparison to global equity markets during times of uncertainty. Methods: Using the event study framework, the paper analyzes the significance and direction of abnormal returns in crude oil futures prices surrounding these two events. The study utilizes the market model with a global equity index as a benchmark for normal returns. Results: The findings show that oil markets responded negatively to COVID-19 and positively to the Russian invasion of Ukraine. Additionally, oil markets displayed both negative and positive abnormal returns when compared to global equity markets during the onset of COVID-19 and the Russian invasion of Ukraine, respectively. Conclusions: This paper contributes to existing literature by contrasting how oil markets reacted to COVID-19 and the Russian invasion of Ukraine. It concludes that the oil market performed worse than the global equity market during COVID-19 but outperformed it during the Russia-Ukraine conflict. Furthermore, the paper assesses the efficiency of oil markets during uncertain times and concludes that there are indications of market inefficiencies where abnormal returns occur before and after external shocks.