On Sunday, Gulf stock markets experienced slight declines, reflecting the initial investor reactions to Iran’s unprecedented attack on Israeli territory.
In the early trading hours, Saudi Arabia’s benchmark stock index (.TASI) dropped by 1.8%, while Qatar’s main index (.QSI) saw a decline of 1.6%. Among the most affected was Gulf lender QNB (QNBK.QA), which led the losses.
In Tel Aviv, both the broad (.TA125) and blue-chip (.TA125) indexes remained relatively steady, showing little to no change despite the tense geopolitical situation.
This market stability comes in the wake of Iran’s drone and missile attack, which was a retaliatory move against a suspected Israeli airstrike.
The attack has heightened concerns about a potential escalation in regional conflict, although damage in Israel was reported as modest.
Financial analysts are closely monitoring the situation.
“If it stays tit-for-tat instead of escalating, then we will likely see a sigh of relief across equities even if oil prices, gold, the dollar, and bonds all embed a risk premium to reflect the conflict,” explained Brian Jacobson, chief economist at Annex Wealth in Milwaukee, Wisconsin.
On the commodities front, Brent crude futures experienced a rise, with prices increasing by 71 cents to $90.45 a barrel last Friday, approaching a six-month high.
This surge is linked to concerns that Iran, being the third-largest OPEC producer, might continue its aggression towards Israel.
Similarly, gold prices soared to a record $2,400 an ounce on the same day, driven by ongoing demand for safe-haven assets.
The geopolitical tensions have also influenced global markets. Since the onset of hostilities, marked by an Iran-backed Hamas attack on Israel on October 7 and subsequent Israeli military actions in Gaza, the MSCI’s global share index (.MIWO00000PUS) reached new heights.
Regionally, other Gulf markets also felt the impact, albeit to varying degrees. Kuwait’s benchmark index (.BKP) dropped by 0.9%, and Oman’s index decreased slightly by 0.2%.
Conversely, Bahrain’s main index (.BAX) saw a 0.9% increase, bucking the overall downward trend observed across most Gulf markets.
Overall, these market movements are indicative of the cautious stance investors are taking as they watch the unfolding events and assess their potential implications on regional stability and economic prospects.