Two-Layer Hormuz Transmission

Helium, semiconductors, and AI-compute evidence from a high-dimensional daily panel structure.

Scientific Article

This research studies whether a geopolitical commodity shock propagates through energy and technology markets differently across time scales. Rather than assuming one stable dependence structure, it decomposes the system into horizon-specific layers and asks whether the transmission that appears dense at short horizons becomes sparse and economically concentrated at longer horizons.

Research question

Do geopolitical commodity shocks create scale-dependent dependence between energy and technology markets, and does the recovered long-horizon structure carry meaningful financial tail-risk information?

Method

The framework combines local projections, generalized Morse wavelets, and scale-specific canonical correlation analysis under classical, ridge, and sparse regularization using high-dimensional daily panels spanning 2020–2026. Randomization-based inference is used to test whether the recovered long-horizon direction is more than a dimensionality artifact.

Main findings

Short-horizon structure

Dense

At short horizons, dependence across the energy-technology system remains broad and distributed rather than concentrated in a small number of channels.

Quarterly structure

Sparse / low-rank

At the quarterly band, the dependence structure contracts into a sparse, lower-rank configuration, revealing a much more concentrated long-horizon transmission direction.

Inference

Survives randomization

The recovered long-horizon canonical direction remains statistically meaningful under randomization-based inference rather than disappearing when the high-dimensional structure is challenged.

Risk implication

Semiconductor downside

Under severe geopolitical stress, the long-horizon direction maps into economically meaningful downside risk for semiconductor-sector exposures.

Why it matters

The paper shows why horizon matters for geopolitical risk. A dense short-run shock map can conceal a far more concentrated structural channel at longer horizons. That distinction is useful for institutional stress testing because it separates immediate market co-movement from the slower transmission path that can accumulate into technology-sector tail risk.

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