Monetary shocks and market sensitivity: Mapping interdependence in the energy-commodity nexus

This study investigates the dynamic interplay between energy and metals prices in response to central bank interest rate adjustments. While existing literature acknowledges the heterogeneous impact of monetary policy across financial assets, the analysis of direct versus indirect transmission channels within this specific commodity-financial nexus remains underexplored. Employing a partial correlation methodology, we use daily closing prices spanning 2019 to 2025 to analyze the behavior of fourteen distinct asset classes under both calm and turbulent market conditions. Our main finding indicates that interest rate expectations and equity markets serve as significant conduits for shock propagation across other markets, particularly pronounced during periods of economic downturn. This evidence emphasizes the necessity of risk management frameworks to explicitly incorporate the influence of monetary policy and market sentiment on asset network structures, a consideration of increasing salience amidst the global transition towards green energy economies. Our findings holds even when an alternative monetary proxy is used and different time periods are considered