Abstract
This study investigates how the COVID-19 outbreak has shaped the volatility spillover between oil and Gulf Cooperation Council (GCC) stock markets. Contagion analysis is conducted by implementing a vector error correction (VECM) asymmetric BEKK model, wherein both cointegration and asymmetric features are considered. Financial market uncertainty caused by the recent health crisis is captured using Baker et al.'s (2020) newly developed infectious disease tracker. Our results indicate a significant discrepancy in the GCC group, as shock and volatility linkages between oil and equities are more apparent for some countries but not for others. The estimated VECM-asymmetric BEKK model reveals cross-market asymmetric spillover effects only in Kuwait, Qatar, and Saudi Arabia. We report that the global pandemic has strongly affected crude oil market volatility, while the GCC region seems to be less affected by the emergence of the new infectious disease. Our findings underscore the diversification opportunities offered by Gulf equity markets to international investors.