The impact of the Russia-Ukraine conflict on the Saudi Arabian stock market: An event study analysis

Abstract

This study aims to delve into the intricate impacts of the Russia-Ukraine conflict on the Saudi Arabian stock market. It specifically examines the extent to which this geopolitical event has influenced market performance and investor sentiment across different sectors. Utilizing an event study methodology, the research meticulously analyzes data over a period encompassing pre-event, event, and post-event phases. This comprehensive approach allows for a nuanced understanding of the market's temporal reactions and sectoral disparities in response to the conflict. The findings of the study are both significant and revealing. The Saudi Arabian stock market exhibited pronounced abnormal returns and cumulative abnormal returns, indicating a strong market reaction to the unfolding geopolitical situation. This response varied considerably across different sectors, highlighting the differentiated impact of the conflict based on sector-specific characteristics and vulnerabilities. Through rigorous hypothesis testing, the study confirms the Russia-Ukraine conflict's tangible impact on the overall market returns in Saudi Arabia. These sector-specific variations in market reactions are particularly enlightening, underscoring the critical need to consider industry dynamics when evaluating the effects of geopolitical risks. The practical implications of this research are far-reaching. It offers valuable insights for investors, policymakers, and financial analysts, particularly in the context of the Middle East. By providing a clearer understanding of how geopolitical events like the Russia-Ukraine conflict can reverberate through financial markets. It also contributes to the broader discourse on the interplay between international conflicts and financial market dynamics, offering a framework for future studies in this area.