Russia–Ukraine war and the resulting sanctions have added new layers of complexity to the interconnectedness of energy and agricultural markets. This study explores how restrictions on Russian energy exports have influenced volatility spillovers between energy commodities like oil and gas and agricultural products such as wheat and corn. The key question it investigates is whether geopolitical uncertainty, exacerbated by the conflict and sanctions, has intensified these financial linkages and how access to information plays a role in moderating these effects.
By employing a time-varying-parameter vector-autoregressive (TVP-VAR) framework, the study tracks how energy–agriculture spillovers evolve from the pre-invasion baseline into the wartime period, marking the sharp jumps that coincide with the major rounds of Western energy sanctions. The findings reveal that volatility spillovers between energy and agricultural markets increased substantially in response to disruptions in global energy supplies. While not tested directly, the paper argues conceptually that energy is a key farm input, which means that rising fuel costs may amplify price instability across both sectors. The study also introduces Google Trends data as a proxy for public uncertainty, showing that heightened concerns about the war led to stronger market fluctuations. However, greater availability of geopolitical risk information was found to mitigate these effects, suggesting that transparency and accurate reporting can help stabilize markets during crises.
The research also highlights how specific geopolitical events triggered spikes in market volatility. Announcements of new sanctions by G7 nations and the EU correlated with sharp increases in energy-agriculture spillovers, underscoring the direct impact of policy decisions on commodity markets. The findings suggest that while sanctions serve as a tool for economic pressure, their unintended consequences must be managed carefully.
The authors stress that a free, prompt and accurate flow of geopolitical information is vital for dampening the extra volatility that conflict-driven uncertainty injects into energy and food markets. This calls for policies that both promote timely disclosure and punish misinformation, while warning investors and regulators to exercise special caution during sanction episodes, when cross-market spillovers become most pronounced.
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