PurposeThe purpose of this research is to examine the linkages between oil prices and stock market in Gulf Cooperation Council (GCC) countries. Prior work argues that oil prices and the GCC stock markets are not related. This conclusion could be due to the fact that only linear linkages have been examined.Design/methodology/approachThis study employs newly developed techniques of rank tests of nonlinear cointegration analysis proposed by Breitung and Gourieroux and Breitung. The Breitung's method is selected in this study due its potential superiority at detecting cointegration when the error‐correction mechanism is nonlinear.FindingsThe empirical analysis of the paper supports that oil price impact the stock price indices in GCC countries in a nonlinear fashion. Thus, the statistical analysis in this paper obviously supports a nonlinear modeling of the relationship between oil and the economy.Research limitations/implicationsThe paper contains the normal limitations associated with the econometric method including statistical bias.Practical implicationsThe implication of this paper findings is that policy makers at GCC countries should keep an eye on the effects of changes in oil price levels on their own economies and stock markets. For individual and institutional investors, the nonlinear relationship between oil and stock markets imply predictability in the GCC stock markets.Originality/valueThe paper presents new findings on the relationships between oil prices and the stock market in GCC countries. These findings should be of interest to researchers, regulators, and market participants.

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