For much of the Middle East, Sunday was the first full day of trading since the one-two punch of US President Donald Trump’s “chart of death” tariff onslaught and a shock decision by OPEC+ to triple a planned output hike. Regional equities slumped at the open, mirroring a drop in global stocks and a steep fall in the price of oil.
In just the last three days, Brent crude has fallen 15% to about $64 a barrel. That has significant implications for the biggest Middle Eastern economy, Saudi Arabia, which needs oil at close to $110 to balance its budget, once domestic investments by the Public Investment Fund are taken into account.
Apart from the trillion-dollar Vision 2030 agenda, the kingdom’s spending over the next few years will also cover outlays for events like the FIFA World Cup in 2034. Lower energy prices will pose a significant challenge for Riyadh, which has already started re-prioritizing projects even as government-related entities step up efforts to raise cash. The decline in crude prices could potentially push the kingdom to make deeper spending cuts than those outlined in its latest budget or further ramp up debt sales. It could also complicate a pledge by Crown Prince Mohammed bin Salman to engage in $600 billion worth of trade and investment with the US over the next four years.
Fears of further pressure on oil prices in the days to come slammed the kingdom’s main exchange on Sunday, with stocks falling as much as 6% and Aramco alone shedding about $90 billion from its market value. That pushed the 14-day relative strength index for the Tadawul All Share Index below 30, indicating it's oversold. The benchmark inched up on Monday, making Saudi among the few markets that managed to eke out gains.
Dubai and Abu Dhabi were open on Friday and seemed to have weathered the storm better than most, but those bourses dropped about 3% Monday. In the weeks leading up to Trump’s tariff announcement, a handful of investors made the case for buying UAE stocks.
Ninety One’s emerging-markets equity team, which manages $11 billion in assets, favored the UAE as it seeks out “uncorrelated markets” to US tariffs, Jorgelina do Rosario and Selcuk Gokoluk reported at the time. Cheyne Capital’s hedge fund, too, has been betting on the country, citing the UAE’s currency peg to the dollar as a key reason.
But it’s perhaps not as clear cut as that, as traders across the Middle East found when they returned to their screens.
“In the short term, regional stock markets in the Gulf Cooperation Council are not immune to global sentiment,” said Fadi Arbid, founding partner and chief investment officer at Amwal Capital Partners. “We have seen it many times in the past like the global financial crisis, Covid, etc. The correlation is there.”
