Asymmetric impacts of geopolitical risks on energy Trade: Divergent vulnerabilities in emerging vs. advanced economies

Abstract

This study investigates the system-wide consequences of rising geopolitical risks (GPR) on global energy trade, emphasizing asymmetric vulnerabilities between emerging market economies (EMEs) and advanced economies (AEs)—a critical gap in existing scholarship. Combining autoregressive distributed lag (ARDL) modeling and impulse response analyses on 55 countries (1990–2023), we assess how geopolitical tensions disrupt energy trade dynamics, accounting for global volatility and domestic economic conditions. Our findings uncover marked asymmetries: while geopolitical risks persistently suppress energy trade, with long-term effects outweighing transient shocks, EMEs are disproportionately destabilized due to their heavy reliance on energy exports and weaker institutional capacity. AEs, conversely, demonstrate greater resilience through diversified economies, strategic reserves, and policy flexibility, though post-2008 geopolitical fragmentation and financial instability intensify disruptions across all economies. Impulse response simulations reveal that geopolitical shocks trigger sharper declines in energy trade flows for EMEs, with steeper and more prolonged contractions than AEs. Compounding these unequal burdens, escalating trade taxes strain EMEs’ fiscal stability and energy security, whereas AEs deploy fiscal buffers to cushion shocks. By exposing how geopolitical risks cascade through energy systems, the study underscores the urgency of multilateral cooperation to address structurally embedded asymmetries, particularly the fragility of EMEs in global energy frameworks.