A flashback on the conflict between Ukraine and Russia

The war between Russia and Ukraine has affected many countries negatively especially the after effects of an energy crisis that befell on most European Union countries. The research by Du and Wang (2022) take on an event study approach on the Russia-Ukraine conflict.

About the Russia-Ukraine conflict

A special military operation in the Donbas region was announced by the region, which marked the beginning of the Russia-Ukraine conflict. The dispute between Russia and Ukraine goes back all the way to 2014. The military conflict has affected many avenues such as the global economy, huge loss of life and financial markets. Military conflicts lead to a variation in stock prices, and the uncertainty about the future probability of firms. Most importantly, the conflict has affected energy markets around the globe immensely. The reason why energy markets were affected is because Russia is a major exporter for oil, coal and gas. The full-scale Russia invasion on the 24th of February 2022 on Ukraine had made their relationship sour.

Since Russia is the major exporter of gas, oil and coal, there were serious negative impacts on the energy markets. Similarly, COVID has impacted many people and sectors, where lots of literature covers the COVID impact on various sectors. There is however, limited research on how military operations impact the financial market. The research taken by Du and Wang (2022) on an event study approach analyses three main findings. These three findings are as follows:

1. The abnormal returns at all markets aggregate level reveals that the energy market has been affected by the conflict between Russia and Ukraine, which has led to a sharp increase in energy prices.

2. According to cumulative average abnormal returns (CAARs), the conflict has had a greater impact on the clean energy market than on the conventional energy market.

3. Further analysis shows that some conventional energy indices, such as DJ Oil & Gas, have had no significant response to the even.

The event study analysed

This is where the event must be analysed, which is the conflict between Russia and Ukraine and the event day, is the day of the declaration. Information was also added on  Furthermore, “we adopt daily data of energy stock indices and divide energy markets into clean energy markets and conventional energy markets. A few calculations were done with the data that has been collected. The study looked at the impacts of the event on the clean and conventional energy markets. Further, the pre-event window and post-event window was analysed.

The results of the study show that companies or businesses who adopt renewable energy are now looking for alternative energy sources but have also secured investors. The energy market was affected the most and analysed, then financial markets and the impacts of the event on the clean and conventional energy markets were then studied.

The conclusion of the study

The conclusion of the study summarizes that the conflict between Russia and Ukraine has caused a turmoil especially for the energy market sector. The article mentions that investors are not looking into renewable energy but other alternative sources of energy after this conflict. The article mentions that, “the Russia-Ukraine conflict is one of the world's worst geopolitical crises and has negatively impacted financial markets around the world. Some Western countries have imposed sanctions and halted trade with Russia.” This impact affects consumers, governments and the price of energy, which has become skyrocketing. The solution highlighted by the article mentions, “to prevent further collateral damage, governments must coordinate and help end the war. In addition, investors need to be more vigilant. Investors clearly prefer renewable clean energy, as the prices of clean energy indices increased dramatically after the declaration of the ‘special military operation’. Moreover, policy makers and regulators need to develop relevant policies and regulations to help the industry transition to sustainable energy.”

A personal viewpoint on the energy crisis and energy

The Russia and Ukraine war has affected many sectors and globally there is an electricity crisis. Most countries are moving towards renewable energy, however the investors in the article want to find other means of energy. In my point of view, renewable energy should be used as it is safe and cleaner and we have unlimited amounts of this energy in the form of wind, sun and water. If non-renewable resources are used then we are just destroying our environment and depleting our resources of oil and gas. Further, we need to make use of climate technology and ways to reduce energy demand and to be energy efficient.