Geopolitical crises and ESG market dynamics: The role of commodity prices, gold, and investor sentiment

Anis Hdider; Fatma Hachicha; Anis Jarboui; Anis Hdider; Fatma Hachicha; Anis Jarboui

doi:10.3934/InnoEcon.2026001

Innovation Economics

2026, Volume 1, Issue 1: 1-33. doi: 10.3934/InnoEcon.2026001

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Research article

Geopolitical crises and ESG market dynamics: The role of commodity prices, gold, and investor sentiment

LARTIGE laboratory, Department of Finance, University of Sfax, Sfax, 3029, Tunisia

Received: 03 February 2026 Revised: 03 June 2026 Accepted: 08 June 2026 Published: 17 June 2026
JEL Codes: G15, G17, G11, F51, Q56

Geopolitical events, such as the 2023 Israeli-Palestinian war, pose risks to sustainable finance by amplifying volatility in ESG stock indices, yet their interplay with investor sentiment and commodity prices remains underexplored. In this study, we analyzed how these factors shape ESG market dynamics across the United States, United Kingdom, France, Italy, and Canada. We applied GARCH models to volatility, alongside Probit and Logit regressions, using daily data from 2022–2024. Investor sentiment was derived via Natural Language Processing (NLP) for Twitter data, processed with Python and Hugging Face models; commodity prices included oil, natural gas, and gold. Our results revealed that the war significantly heightened ESG index volatility, with stronger effects in Europe than North America. Oil price shocks positively correlated with volatility, while investor sentiment showed limited influence before and after the event. These findings underscored ESG indices' vulnerability to geopolitical and commodity risks, informing risk management in sustainable portfolios.
- ESG indices,
- geopolitical risk,
- GARCH models,
- investor sentiment,
- sustainable finance,
- Natural Language Processing
Citation: Anis Hdider, Fatma Hachicha, Anis Jarboui. Geopolitical crises and ESG market dynamics: The role of commodity prices, gold, and investor sentiment[J]. Innovation Economics, 2026, 1(1): 1-33. doi: 10.3934/InnoEcon.2026001

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Abstract

Geopolitical events, such as the 2023 Israeli-Palestinian war, pose risks to sustainable finance by amplifying volatility in ESG stock indices, yet their interplay with investor sentiment and commodity prices remains underexplored. In this study, we analyzed how these factors shape ESG market dynamics across the United States, United Kingdom, France, Italy, and Canada. We applied GARCH models to volatility, alongside Probit and Logit regressions, using daily data from 2022–2024. Investor sentiment was derived via Natural Language Processing (NLP) for Twitter data, processed with Python and Hugging Face models; commodity prices included oil, natural gas, and gold. Our results revealed that the war significantly heightened ESG index volatility, with stronger effects in Europe than North America. Oil price shocks positively correlated with volatility, while investor sentiment showed limited influence before and after the event. These findings underscored ESG indices' vulnerability to geopolitical and commodity risks, informing risk management in sustainable portfolios.

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