The Impact of Russia-Ukraine Conflict on Global Financial Markets

This paper examines the impact of the Russia-Ukraine conflict on the volatility spillovers and their dynamics among major global financial markets, including global stock (USA, China, Japan, UK, Germany, and France), major cryptocurrencies (BTC and ETH), crude oil (WTI) and gold markets. The study employs a Time-Varying Parameter-Vector Autoregression (TVP-VAR) based connectedness framework and a network method. The key findings are as follows: First, total spillovers among global financial markets increased significantly during the Russia-Ukraine conflict. Second, directional spillover results show that during the Russia-Ukraine conflict, the French and German stock markets are the largest net volatility transmitters, indicating that these markets are driving the global market risk. Whereas the Japanese stock market is the largest net volatility receiver. Third, the US stock market was a volatility transmitter before the conflict and turned into a volatility receiver during the conflict. However, Chinese market's role has been reversed. In other words, the role of the Chinese stock market changed from a volatility receiver before the conflict to a volatility transmitter during the conflict. Our findings contribute to the literature considering the spillover effect during time of extreme turbulence