Russia-Ukraine Conflict Sentiments and Energy Market Returns in G7 Countries: Discovering the Unexplored Dynamics

Abstract

The dependence of the G7 countries on Russian fossil fuels has made them susceptible to any shocks in the Russian economy. The recent Russia-Ukraine Conflict created a disruption in the energy supply mechanism in the G7 countries. The impact of the shock varies according to the nature of dependence on the import of Russian Oil and Gas, and this shock might be critical for the attainment of the SDG 7 objectives, as well as their clean energy transition future. The exact nature of the Russia-Ukraine Conflict sentiments on the Oil and Gas market of the G7 countries is still unknown, and understanding this impact is important from the perspective of the sustainable energy future of these economies. There lies a gap in the policy and academic discourse in understanding this impact, and there lies the role of the present study. The present study analyzes the impact of the Russia-Ukraine Conflict sentiments on the returns on Oil and Gas prices for the G7 countries. It is analyzed by creating a comparative scenario between six months before and after the conflict. Given the extremity of the event, a tail-dependence between the sentiment and returns is assumed, and therefore, Cross-Quantilogram and Partial Cross-Quantilogram approaches are used. Further, these impacts have been controlled for the economic policy uncertainty and inflation in the G7 countries. The results show significant differences in outcomes captured in the pre- and post-conflict scenarios. The continued dependence on the import of Russian Oil and Gas and a sudden sanction on the imports have created both transient and persistent shocks in the Oil and Gas markets of the G7 countries. The outcomes are utilized to recommend a policy framework for SDG 7 attainment in the G7 countries.