Geopolitical Risks Shake the Stock Market: The Critical Role of Energy Markets

According to a new study, geopolitical risks closely affect energy and stock markets in Turkey. The study reveals that geopolitical risks have a significant impact on stock returns, especially energy stocks are the most affected by this situation.

Geopolitical risks emerge as a factor negatively affecting stock returns, and the share values of energy companies are greatly affected by this situation. In other words, political and military tensions worldwide cause a drop in energy stocks in Turkey.

The research shows that electricity supply also plays a significant role in this process. When market conditions are good, electricity supply increases stock returns. However, when the market goes bad, the electricity supply is negatively affected by geopolitical risks, which further deepens economic problems.

The reforms of the Energy Market Regulatory Authority (EPDK) towards liberalizing the energy sector have changed the impact of electricity supply on financial markets. These reforms show that changes in the energy sector directly affect stock returns.

Maintaining the stability of energy supply during periods of increasing geopolitical uncertainties is of critical importance to mitigate economic negative effects. Creating strategic energy reserves and finding alternative energy supply routes can contribute to market stability.

This research emphasizes the significant impact of energy markets on the stock market and highlights how important policies in this field are.

Study Link: https://www.sciencedirect.com/science/article/pii/S2214845023001308?via%3Dihub