The impact of geopolitical risks on connectedness among natural resource commodities: A quantile vector autoregressive approach

This study examines the impact of global geopolitical risk on connectedness among major natural resource commodities. We implemented a Quantile Vector Autoregressive connectedness estimation approach from 5 January 2010 to 3 March 2023, including many geopolitical turbulences, such as the Russian-Ukrainian war. We found high connectedness under both extraordinarily high and low return conditions. The extreme return shocks in metals tended to spillover to energy commodities. The spillover index peaked during important economic, political, and financial developments. In addition, geopolitical risk drives connectedness among natural resources commodities under average market conditions. Our results may help investors with portfolio optimization and risk management practices and guide policymakers toward attaining financial market stability. •Analyzed the dynamics of connectedness among commodities at extreme quantiles.•Analyzed the role of geopolitical risk (GPR) on the connectedness dynamics of commodities during extreme market conditions.•The extreme return shocks in metals tended to spill over to energy commodities.•The GPR index drives connectedness among natural resources commodities during extreme geopolitical events.