Israeli-Iranian Escalation Rattles Arab Markets, Egypt Hit Hardest
The escalating conflict between Israel and Iran cast a heavy shadow over Arab financial markets on Sunday, triggering sharp selloffs, particularly in the Gulf. Investors fled risk amid fears of a prolonged confrontation, though some analysts pointed to potential recoveries in select regional markets should oil prices continue to rise.
Oil surged on Friday as Israel launched strikes against Iranian targets, with prices jumping as much as 13%. Global financial institutions now expect further increases if hostilities persist. JPMorgan forecasts oil could hit $130 per barrel, while Rystad Energy projects prices may soar to $150.
Israel's strikes reportedly targeted nuclear facilities and ballistic missile factories inside Iran. Tehran retaliated with attacks on Israeli territory and canceled nuclear talks slated for Sunday, negotiations that the US described as the only viable path to halting Israel's bombing campaign.
Gulf stock markets reacted immediately. The Saudi market, the region's largest, fell 1%, hitting a 12-month low, with bank stocks leading the decline. Al Rajhi Bank dropped 1.5%, dragging the main index lower. The market had initially plunged by nearly 3.8% before trimming losses after Aramco shares rose 2%.
Qatar's benchmark index tumbled 3.2%, its steepest one-day drop since April, with every listed company ending in the red. Qatar National Bank, the Gulf's largest lender, declined 4.2%, while Qatar Gas Transport Company lost 3.3%.
Kuwait's stock exchange posted its worst daily performance since April, with the premier market index sliding 3.9%, its sharpest drop since April 6.
Markets in the UAE, which operate on Fridays, were among the first to react to the conflict. Abu Dhabi's index fell 1.34%, while Dubai's dropped 1.87% during Friday trading. Oman's Muscat Stock Exchange declined 0.87%, and Bahrain's bourse slid 0.81%.
Egypt, already grappling with economic challenges, saw its main index plummet 7% at the start of Sunday's session before paring losses to close down 4.6%. The sharp decline was driven by a wave of regional selling as investors assessed the broader implications of a potential war in the Middle East.
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