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We investigate the effect of armed conflicts in the Middle East, which are representative geopolitical events, from an event study perspective. Specifically, we analyze the impact of conflicts in the Middle East on the stock returns of international oil companies in the countries engaged in the conflicts. We examine the stock returns of the top nineteen oil companies in nine countries during four conflicts from 1990 to 2011. By applying the market model of the event study methodology, we find that the abnormal returns of the companies in countries that did participate in the conflicts were higher than those of the companies in countries that did not participate. Furthermore, among the companies in countries that participated, those in the U.S. had higher stock returns than those outside the U.S. These findings suggest that political factors, such as military engagements, can have a statistically significant impact on oil company returns. [ABSTRACT FROM AUTHOR]

This study examines the effects of Middle East conflicts on the returns of national and international oil companies. We apply an event study method to assess the impact of such conflicts on the abnormal returns of 33 oil companies. We categorize 20 conflicts into three types—international, interstate, and intrastate—for the period of 1990–2013. Our results suggest that these conflicts have more positive effects on national oil companies (NOCs) than on international oil companies (IOCs). In addition, the effects on IOCs and NOCs statistically differ by the three conflict types. More specifically, while international and intrastate conflicts have positive and long-lasting effects on NOCs, these affects are not significant for IOCs. Interstate conflicts present higher cumulative abnormal return after the event for NOCs than IOCs. In conclusion, the impact of conflicts manifests differently among the various types of oil companies and depend on conflict type. [ABSTRACT FROM PUBLISHER]