U.S.–China tensions and the transmission of oil volatility to clean tanker freight markets

This paper examines whether U.S.–China geopolitical tensions influence the transmission of oil market volatility to clean tanker freight market volatility. Using monthly data from January 2007 to February 2024, we estimate interaction models, quantile regressions, and a GARCH-X specification. The results indicate that oil price volatility is positively associated with freight market volatility under normal market conditions. However, this relationship weakens during periods of elevated U.S.–China tensions. Quantile regression estimates reveal that the moderating effect of geopolitical tensions is concentrated in the upper tail of the freight volatility distribution, suggesting that bilateral tensions become particularly relevant during periods of market stress. Additional GARCH-X estimates show that geopolitical tensions do not directly affect conditional volatility but may influence how oil market shocks are transmitted to freight markets. Overall, the findings are consistent with the presence of a state-dependent transmission mechanism linking energy and freight markets, with implications for shipping, trade, and geopolitical risk.