This study examines the intertemporal theory of external adjustment and the determinants of country portfolio dynamics by using two types of oil income shocks with different timings— worldwide giant oil and gas discovery news shocks and contemporaneous oil and gas net export revenue shocks due to changes in international oil price. The empirical estimates based on a large panel of countries covering the period of 1960–2012 are consistent with the intertemporal model and international portfolio diversification theory. After an oil discovery, net foreign assets decline in the first five years and then rise sharply in the following years. By contrast, net foreign assets immediately hike upon oil revenue shocks and the effect declines afterwards. The external adjustment upon oil shocks is largely driven by the current account channel, but valuation effects substantially stabilize the current account adjustment for oil revenue shocks in short run. FDI inflow rises soon after oil discovery news, but the net holdings in foreign debt assets increase significantly after an oil revenue shock, indicating that expected return and international risk sharing are both important determinants of country portfolio.