Effects of the Middle East conflicts on oil company returns

Abstract

ABSTRACTThis study examines the effects of Middle East conflicts on the returns of national and international oil companies. We apply an event study method to assess the impact of such conflicts on the abnormal returns of 33 oil companies. We categorize 20 conflicts into three types—international, interstate, and intrastate—for the period of 1990–2013. Our results suggest that these conflicts have more positive effects on national oil companies (NOCs) than on international oil companies (IOCs). In addition, the effects on IOCs and NOCs statistically differ by the three conflict types. More specifically, while international and intrastate conflicts have positive and long-lasting effects on NOCs, these affects are not significant for IOCs. Interstate conflicts present higher cumulative abnormal return after the event for NOCs than IOCs. In conclusion, the impact of conflicts manifests differently among the various types of oil companies and depend on conflict type.