Impact of oil price shocks on the Viet Nam stock market

Abstract

This study investigates the impacts of three types of oil price shocks- supply, demand, and risk- on Vietnam’s stock market through the VN-Index during 2018-2025. Employing the Wavelet Local Correlation (WLC) method, the analysis captures time- and frequency-varying relationships, highlighting the nonlinear and heterogeneous effects of oil shocks. The findings reveal that supply and demand shocks can exert positive influences during periods of economic recovery but turn negative under crises or geopolitical tensions. In contrast, oil-specific risk shocks predominantly generate persistent negative impacts on the VN-Index, although short-term positive effects occasionally emerge. These results provide important implications: investors should differentiate between the sources of oil shocks when designing portfolio risk management strategies, while policymakers should closely monitor the underlying causes of oil price volatility to effectively adjust macroeconomic instruments. Moreover, the study confirms the effectiveness of the WLC approach in analyzing emerging markets, which are characterized by high volatility and strong dependence on global factors.