Interaction between the dynamics of global oil market and Iran's petrochemical stock index (by emphasizing on oil sanctions)

In this study, using a structural vector autoregressive (SVAR) model and monthly data from 2009m01 to 2019m09 including crude oil global production, global demand of the crude oil, Brent crude oil price, liquidity and dollar price as well as consumer's inflation index of Iran, an attempt is made to investigate the effects of disentangling demand and supply oil price shocks on Iran's petrochemical stock index. Findings indicate demand shocks formed due to global economic growth and precautionary demand have persistent, substantial and significant effect on stock index while supply shocks cause a small, transitory and insignificant increase on stock index. Other findings show the positive and significant effect of dollar index and inflation on index stock. The positive liquidity shock decrease the stock index attributed to the increased demand in parallel financial market such as foreign exchange, gold and housing. Sensitivity analysis is done by entering the Iran's oil production (as the sanction proxy) and the response of stock index was not sensitive. The positive shock in Iran oil production increase stock index temporarily and in short-run. Eventually, the sanctions not only decrease the profit of petrochemical industries but also due to increase in dollar index and domestic inflation, this export-based industries experienced more profitability. In other words, even if the petrochemical companies lower exports and rates due to the sanctions, the profit and revenue of this industry increased by depreciating domestic currency.