Abstract
The objective of this study is to determine the impact of oil price fluctuations on the financial performance of banking sector in 8 oil producing and exporting countries in Middle East region (Kingdom Saudi Arabia, United Arab Emirates, Qatar, Bahrein, Kuwait, Jordan, Oman, Iran) in the period between January 2012 and December 2017. The results do not reveal the same impact of oil price fluctuations on the financial performance of banking sector in each studied country. A significant direct impact of oil prices on the financial performance of banking sector has been found in Bahrein, Oman and Iran. In Jordan, Kuwait, Qatar, Saudi Arabia and United Arab Emirates, the results do not reveal any direct impact of oil price fluctuations on the financial performance of banking sector. The analysis also showed that the size of the economy in each country and its diversification in non-oil sectors have a direct impact on the relationship between oil price fluctuations and financial performance of banking sector. The existence of well diversified economy in non-oil sector reduces the direct impact of oil price fluctuations on the financial performance of banking sector. Keywords: Oil prices, Banks, Financial Performance, Macroeconomics Factors. JEL Classifications : E02, E44, E6, G21, Q41 DOI: https://doi.org/10.32479/ijeep.8075
Highlights
The majority of Middle East (ME) countries are considered as oil producing countries and their government revenues and expenditures depend mainly on oil price fluctuations
It is believed that this actual long stage of low oil price can not stay without direct implication on government expenditure, economic indicators and banking sector in emerging markets mainly, in oil producing and exporting countries in Middle East region
The results reveal a direct impact of oil price fluctuations on the financial performance of banking sector in Bahrein, Oman and Iran
Summary
The majority of Middle East (ME) countries are considered as oil producing countries and their government revenues and expenditures depend mainly on oil price fluctuations. Oil sector is considered as a driver of financial variables and business in public and private sectors in oil producing and exporting countries in Middle East region. For this reason, many studies indicate that the economic development and economic situation in oil producing countries are largely related to the international oil price and oil shocks. For Said (2015), when the oil prices increased in 1980s, oil producing countries in Middle East region experienced high GDP level. On the other hand, when oil prices decreased in 2009 and 2014, GDPs and many economic sectors dropped down in oil producing countries in Middle East region
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