The Russia-Ukraine war, beginning February 24, 2022, has had a profound impact on the global economy, particularly the energy market. Russia, being the second-largest oil producer globally, its involvement in the conflict caused significant disruptions to oil supply. This resulted in a sharp increase in crude oil prices, with Brent and WTI reaching their highest levels since July 2008 in March 2022. However, subsequent events, including the Federal Reserve's interest rate hikes and the strengthening US dollar, created complexities in disentangling the war's specific impact on oil prices. This study aims to address this challenge by employing a novel methodology to isolate the net effect of the Russia-Ukraine war on crude oil prices, separating its impact from other concurrent events. The research questions are: 1) How much did the Russia-Ukraine war increase crude oil prices? 2) Did it have the same impact on the American and European markets? 3) How can the effects of other events be identified and separated? Addressing these questions provides crucial insights for developing both short-term emergency strategies and long-term response plans for relevant stakeholders.

Existing literature extensively examines the influence of extreme events, such as wars, pandemics, and economic recessions, on energy markets. Studies frequently utilize geopolitical risk indices (GPR) to analyze the relationship between geopolitical conflicts and energy prices, showing that geopolitical risk is a primary driver of oil price volatility. Different types of extreme events have varying impacts; supply-side shocks (e.g., the Gulf War, 9/11 attacks) increase price volatility, while economic crises (e.g., the Asian and global financial crises) lead to prolonged volatility. Studies have also explored impact channels, such as investor sentiment, inventory dynamics, supply disruptions, and demand shifts. Event analysis is a widely used method, often combined with time series models like AR-GARCH. Previous event studies using empirical mode decomposition (EMD) have analyzed the effects of specific wars and financial crises on oil prices. However, a common limitation is the failure to account for the influence of other concurrent events within the analysis window, leading to potential biases in estimating the event's impact. This study addresses this limitation by proposing a more refined methodology.

This study introduces an Event analysis method based on multiresolution causality testing (EMC) analytical framework to overcome the limitations of existing event study methods. The EMC framework involves several steps: 1) **Identifying Research Events and Analysis Windows:** The study focuses on the Russia-Ukraine war, defining an event window (February 24, 2022 – October 27, 2022) and an estimation window (June 24, 2021 – February 23, 2022). 2) **VMD Decomposition:** Variational mode decomposition (VMD) is used to decompose the daily time series data of WTI and Brent crude oil prices, the geopolitical risk index (GPR), and the US dollar index into intrinsic mode functions (IMFs) representing different frequency components. 3) **Multiresolution Causality Testing:** A multiresolution causality test, based on the MRA theory, is conducted to assess the causal relationships between the GPR index, the US dollar index, and the crude oil prices across different IMFs. This step is crucial in isolating the effect of the war from other factors. 4) **Analyzing the Inherent Mode:** Statistical analysis is used to identify the main mode (IMF) representing the long-term trend influenced by the Russia-Ukraine war. 5) **Breakpoint Test:** Bai and Perron's structural breakpoint test is applied to the monthly Brent crude oil prices to determine if the war caused a structural break, indicating a long-term change in the trend. 6) **Economic Analysis:** The results from the previous steps are combined to provide a comprehensive economic interpretation of the war's impact on crude oil prices. VMD offers advantages over EMD by avoiding modal aliasing and endpoint effects, resulting in more robust decomposition. The multiresolution causality test ensures that the impact of the Russia-Ukraine war is isolated from other confounding factors, such as the Federal Reserve's interest rate hikes and the strengthening US dollar, within the chosen event window.

The multiresolution causality test revealed a significant one-way causal relationship between the GPR index (reflecting the Russia-Ukraine war) and both WTI and Brent crude oil prices across all IMFs. In contrast, no causal relationship was found between the US dollar index and crude oil prices. Event analysis using VMD decomposition showed that the Russia-Ukraine war led to a substantial increase in WTI and Brent crude oil prices: $37.14 (52.33%) and $41.49 (56.33%) respectively. IMF4, identified as the primary mode, explained 70.72% and 73.62% of the price fluctuations in WTI and Brent, respectively, within the event window. The analysis using Hilbert-Huang Transform indicated that the war significantly amplified the volatility of crude oil prices. The breakpoint test confirmed that the war fundamentally altered the long-term trend of Brent crude oil prices. The impact on Brent was more significant than on WTI, reflecting Europe's higher dependence on Russian oil imports. High-frequency IMFs (IMF1 and IMF2) showed short-lived fluctuations, while the low-frequency IMF (IMF4) captured the long-term impact of the war.

The findings demonstrate the significant and multifaceted impact of the Russia-Ukraine war on crude oil prices. The EMC framework successfully disentangles the war's effect from other concurrent events, providing a more accurate assessment. The substantial increase in oil prices, primarily driven by the war, highlights the vulnerability of the global energy market to geopolitical shocks. The amplified volatility underscores the heightened risk and uncertainty in the oil market. The long-term impact, as evidenced by the structural break, signifies a potential shift in the fundamental dynamics of oil prices. These findings have significant implications for policymakers, energy companies, and investors. The differentiated impact on WTI and Brent highlights the importance of regional factors and supply chain vulnerabilities.

This study contributes to the literature by introducing a novel EMC framework for analyzing the impact of extreme events on commodity prices. The application of the framework to the Russia-Ukraine war reveals a substantial and lasting impact on crude oil prices, highlighting the war's role in amplifying volatility and altering long-term trends. Policy recommendations include strengthening emergency management mechanisms, diversifying energy imports, promoting energy transition, and leveraging financial instruments for risk mitigation. Future research should focus on refining the methodology to account for the overlapping effects of multiple extreme events and on a more detailed analysis of the long-term consequences of the Russia-Ukraine war.

While the EMC framework provides a more accurate assessment than traditional event studies, some limitations exist. The analysis assumes a linear relationship between variables, potentially neglecting non-linear dynamics. The study focused primarily on the price impact and did not delve into the detailed impacts on production and consumption. The impact of other factors, such as the spread of COVID-19 variants and the Federal Reserve's interest rate hikes, were considered and partially accounted for, but their full influence might not be completely captured. Future research could explore these aspects in more detail.