Dual Shock: Impact of COVID-19 and Fall in Oil Prices from GCC Perspective

The study examines the effect of COVID-19, plunge in oil prices and stock market returns of Gulf Council Co-operation. As the demand and supply shock of oil has disrupted the global economy with the impact of COVID-19, our study attempts to trace out the relationship existence between these variables. To investigate the effect of this pandemic and the drop in oil prices and stock returns, the study employed a panel regression approach using two measurements: (1) daily growth in total confirmed cases and (2) daily growth in total deaths caused by COVID-19. There is no research available analyzing the relationship between COVID-19, oil price fluctuations and stock market index of GCC. It is this gap that the current study tries to fill by examining the effect of COVID-19, the fall of oil prices and stock market returns of GCC. The study found that there was bi-directional causality relationship between death cases as well as confirmed cases of COVID-19 to stock market returns, also it was also found that there was a uni-directional relationship of confirmed cases of COVID-19 and oil prices in world market, leading to an effect on the stock market returns, which shows that increased confirmed cases resulted to the reduced oil prices in world market affecting the investments in the stock market.