Shock Absorbers or Amplifiers? How Do Firms Transmit Shocks in a Polycrisis Era?

The authors explore how global oil prices and geopolitical tensions are reshaping the spread of financial risk among firms worldwide. Analyzing over 1,300 publicly listed companies in 55 countries between 2016 and 2023, they find that slow-building, long-term shifts in oil prices and geopolitical instability do the most damage, embedding risk more deeply into corporate networks over time. Paradoxically, sudden short-term shocks can cause firms to temporarily pull back and hedge, briefly reducing financial contagion. The study also finds that energy companies are especially sensitive to geopolitical tensions, developed-country firms are more exposed due to their deeper integration into global financial markets, and developing countries suffer disproportionately due to weaker institutions and thinner financial buffers. The authors conclude that managing systemic financial risk requires long-term, structural strategies, and that fostering competitive, flexible markets is more effective than relying on the resilience of dominant firms alone.