Saudi stocks are lagging emerging-market peers for the first time since the pandemic as tensions in the Middle East mount and the kingdom dials down plans for a sprawling desert construction project.
The Tadawul All Share Index is nearly 6% behind the MSCI Emerging Markets gauge so far this year, the first time it’s trailed in the period since 2020 when tumbling demand battered oil prices. Once again, Saudi shares are tracking a drop in crude, while authorities have reportedly scaled back the futuristic Neom development — a major driver for several sectors in the market in the past few years.
Pressure is also coming from outside the country as the war in Gaza fans fears of a broader conflict. Concern the Federal Reserve won’t cut rates as fast as hoped is weighing too — Saudi Arabia’s central bank, like others in the Gulf, largely follows US interest-rate decisions to protect its dollar peg.
“Lower oil prices as well as escalating regional geopolitical issues that affected almost all sectors on the exchange” have caused the disconnect, said Junaid Ansari, director of investment strategy and research at Kamco Investment Co. “Conflicting messages” about Saudi projects also hurt sentiment, resulting in foreigners being net sellers last month, he said.
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