The objective of the present study is to investigate the impact of crude oil and natural gas prices on stock market indices of selected Islamic countries. Given the critical role of energy in the global economy and its direct influence on the financial markets of both energy-producing and energy-consuming countries, this research seeks to analyze the relationship between fluctuations in oil and gas prices and the performance of stock indices in these nations.
The research employs a quantitative methodology, utilizing econometric models that incorporate the wavelet-based quantile regression approach for data analysis. Data were collected from reputable financial and energy sources over the period 2006–2022, and Python version 3.11 was used to examine the relationships between variables.
The results of the wavelet quantile regression reveal that, in the short-term scale (D1), the effect of oil prices on stock indices is significantly stronger at the 80th quantile (coefficient = 0.81235) than at the 20th quantile (coefficient = 0.24178)—approximately 3.3 times stronger. A 10% increase in oil prices leads to an 8.1% rise in stock indices at the higher quantile. Similarly, natural gas prices exhibit a stronger short-term impact (D1) at the 80th quantile (0.65421), which is about five times greater than the long-term effect (D3). Oil-exporting countries benefit 1.8 times more from these price shocks than oil-importing countries, and the proposed model outperforms traditional studies by a factor of 1.7.
These findings highlight the added value of the wavelet approach, which successfully anticipated four major crises (2008, 2014, 2020) and can assist economic policymakers and capital market participants in making informed investment decisions and designing appropriate economic policies. The study recommends the establishment of quarterly oil and gas investment funds and the implementation of long-term economic. diversification programs.