PurposeThe purpose of this paper is to examine whether oil price risk is a significant determinant of stock returns.Design/methodology/approachUsing monthly data on a sample of Islamic stocks listed on the New York Stock Exchanges and National Association of Securities Dealers Automated Quotations System (NASDAQ) over the period from January 1990 to December 2017, the study examines whether oil price risk is a significant determinant of stock returns using Fama–French–Carhart’s four-factor asset pricing model amplified with Brent oil price factor.FindingsThe results from the cross-sectional regression analysis indicate that the extent of the exposure is significantly positive using a full sample period. Moreover, results from size and momentum factors are highly significant whereas book-to-market has no significant impact on Islamic stock returns.Research limitations/implicationsThe results support the concept for diversification in equity investment and are thus important for investors, analysts and policymakers.Originality/valueThis study is the first of its kind to establish whether oil price risk is a factor that can determine returns of Islamic listed stocks using the most developed stock market in the world (New York Stock Exchanges and NASDAQ).