Oil Price Shock Transmission, Macroeconomic Spillovers, and the Cross-Continental Impact on Gulf and East African Community Economies (2025–2026)

Abstract

This paper presents the first systematic econometric analysis of the macroeconomic spillover effects of oil price shocks, combining a structural vector autoregression (SVAR) model estimated on monthly data (2012-2026) with panel regression analysis of ten economies - five East African Community member states and four Gulf Cooperation Council states. The SVAR identified three transmission channels: direct fuel price, general inflation, and output contraction. Impulse response functions show that a one-standard-deviation Brent crude shock produces a peak global CPI increase of approximately 1.8 percentage points at six months and a peak output contraction of approximately 0.7 percentage points at nine months. Panel regression confirms significant negative effects on EAC GDP growth and significant positive effects on GCC current account balances.