Abstract
Risks caused by geo-risk cases, such as regional conflicts, propagate around the world, and this study provides insights into the dynamic and complex interactions of risks between international geopolitical risks, international shipping markets, China's carbon market, and the energy sector. The findings show that international geopolitical risk and international shipping markets are net transmitters of risk with positive net spillover values, indicating that they tend to export risk volatility to other markets. In contrast, the Chinese carbon market and the markets of traditional energy and high-emission sectors exhibit amplified volatility in the face of extreme risk events such as the COVID-19 pandemic, the Russian-Ukrainian conflict and the Israeli-Palestinian conflict. This highlights the time-varying nature of risk spillovers in these markets. Notably, the peaks in net spillovers from the Geopolitical Risk Index to the Baltic Dry Index and Shanghai crude oil futures suggest a direct correlation with geopolitical tensions affecting the oil and shipping industries, such as conflicts in oil-rich regions or maritime disputes affecting shipping lanes. These findings highlight the mediating role of international shipping in the transmission of geopolitical risks to regional markets. The paper concludes with policy recommendations for predicting and mitigating the impact of geopolitical uncertainty and shipping markets on energy markets.