Dynamic Interdependence Between the Bond Market, Crude Oil Price, Geopolitical Instability and Financial Volatility

This paper analyzes the dynamic interdependence between the bond market, crude oil prices, geopolitical instability, and financial volatility. The objective is to understand how these factors interact and transmit each other over time, particularly during periods of major financial and geopolitical crises. Data. The study covers the period 2000–2024 and uses data on sovereign bond yields, crude oil prices (WTI and Brent), the geopolitical instability index of Caldara and Iacoviello (2022), as well as financial volatility indicators (VIX and MOVE). Methods. Empirically, we combine a structural vector autoregression (VAR) model to identify exogenous shocks, a Dynamic Conditional Correlation — Generalized Autoregressive Conditional Heteroskedasticity (DCC‑GARCH) model to examine the temporal evolution of correlations, and structural break tests to highlight the effect of crises (global financial crisis, COVID‑19, conflict in Ukraine). The results show a significant non‑linear interdependence between the four dimensions studied. Oil and geopolitical shocks strongly influence bond yields and increase financial volatility, with more pronounced effects in emerging countries than in developed economies. Dynamic correlations indicate an intensification of risk transmission during periods of crisis, suggesting an amplifying role of geopolitical instability in the propagation of financial shocks. Contribution. This work is distinguished by the joint integration of the bond market, oil, geopolitical instability and financial volatility in a single dynamic framework. Unlike previous studies that focus on bilateral relationships (oil — bonds or geopolitics — financial markets), this research proposes a systemic approach highlighting the multiple channels of risk transmission.

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