A wavelet-based methodology to compare the impact of pandemic versus Russia–Ukraine conflict on crude oil sector and its interconnectedness with other energy and non-energy markets

We address the important question of whether the COVID-19 pandemic and the Russia–Ukraine conflict have the same economic impact. Our study focuses on a comparative analysis of the crude oil markets with other energy and non-energy markets in terms of market efficiency and interconnectedness during the two crises. We deploy a novel methodology that utilizes the wavelet decomposition of time series, which facilitates capturing of information in both time and frequency domain, to evaluate the market efficiency. Subsequently, the wavelet coherence, along with a vector-valued GARCH model applied on the wavelet details, help us in quantifying the interconnectedness and spillover dynamics between different markets. Our analysis suggests that the energy sector is impacted more than the non-energy sector in times of both the crises, however the nature of the impact is different for different energy markets. Brent crude oil suffers more during the Russia–Ukraine war than during the pandemic, while natural gas suffers more during the pandemic than the war and WTI suffers equally during both the crises. We also report increased interconnectedness between markets during the pandemic and the war. This information would help investors to choose a safe market and plan their portfolio accordingly in a crisis period.