Terrorism in OPEC countries and oil prices

Abstract

Purpose

The purpose of this paper is to examine the impact of terrorism in the Organization of the Petroleum Exporting Countries (OPEC) on the return and volatility of world price of oil.

Design/methodology/approach

GARCH models and daily data from 1987 till 2015 will be used.

Findings

The empirical results reveal that terrorism in the OPEC affects positively oil returns and negatively its volatility. Results also show that the different characteristics of the attacks are likely to have different impact on the return and volatility of oil prices. In overall terms, terrorism has a much larger positive impact on the return of oil prices and negative impact on its volatility if it targets the oil industry in the OPEC. This marginal effect is even greater if those attacks were successful.

Originality/value

The distinguishing feature of this paper is that the authors use a framework that takes into account different attributes for terrorism the success of the attacks, the intensity of the attacks and the associated targets.

Citation

Bassil, C., Hamadi, H. and Bteich, M. (2018), "Terrorism in OPEC countries and oil prices", International Journal of Emerging Markets, Vol. 13 No. 6, pp. 1732-1750. https://doi.org/10.1108/IJoEM-11-2017-0493