Gulf Stock Markets Decline as U.S.-Iran Military Tensions Escalate

Escalating U.S.-Iran Military Confrontation Impacts Gulf Markets

Gulf stock markets faced a broad sell-off this week, driven by escalating military tensions between the United States and Iran. As regional conflict intensified, indices across the region recorded significant losses, while global investors retreated from riskier assets amid fears of disrupted energy supplies and potential inflationary pressure.

Regional Market Contraction and Military Escalation

The regional markets entered trading sessions under the pressure of intensifying military confrontation between the United States and Iran, following a period where the region witnessed an intensive exchange of attacks and the targeting of vital facilities. The collapse of a temporary ceasefire last week deepened uncertainty regarding energy security and supply chain stability.

The United States announced it had conducted air strikes on Iran for the eighth consecutive night, following reports of the death of two American soldiers in Jordan and the loss of another following an Iranian attack. In response, the Kuwaiti military, which faced continuous Iranian attacks on Saturday, confirmed it had intercepted further missiles and drones launched by Iran on Sunday. Similarly, state television in Bahrain reported that air defenses had countered an Iranian attack on the same day. This escalation has prompted widespread market volatility and fears of a slide into a comprehensive war.

Qatar National Bank and Nakilat Lead Market Declines

Performance Across Gulf Indices

The impact of the regional instability was reflected in the performance of major bourses. In Qatar, the index fell 1.5%, heavily impacted by a 3% decline in the shares of Qatar National Bank, the largest bank in the Gulf by assets. Additionally, the share of Qatar Gas Transport Company (Nakilat) fell by 2%. During that session, millions of shares were traded through the execution of thousands of transactions across all sectors.

Broader regional sentiment remained under pressure as traders weighed the potential for a new inflationary wave that could force the U.S. Federal Reserve to raise interest rates at a faster pace. Given the peg of most Gulf currencies to the U.S. dollar, these concerns reflected directly on investor movement. Gulf exchanges closed on weekly losses after a new round of U.S. strikes on Iranian military sites fueled fears of a full-scale conflict. The U.S. attacked Iranian coastal defenses and missile sites following the re-imposition of a naval blockade on Iranian ports, while Tehran warned it might impose further restrictions on regional energy exports, declaring itself in an existential war with Washington.

For more on this story, see Asian Stocks Rise on Soft US Inflation Despite Middle East Tensions.

Donald Trump Reverses Tariff Plans for the Strait of Hormuz

Energy Security and the Strait of Hormuz

Global financial markets were dominated by an atmosphere of war and uncertainty throughout the past week, as geopolitical tensions combined with a revaluation of the technology sector. Oil markets emerged as the primary beneficiary of this complex scene, with prices recording sharp weekly jumps driven by direct fears of global supply disruptions and the worsening crisis around the Strait of Hormuz. This situation revived the specter of persistent inflation and the difficulty of price control.

Three sources told Reuters that Iran had requested that the Houthis in Yemen be prepared to close the oil corridor in the Red Sea if the United States targeted Iranian energy infrastructure, creating a dangerous new threat to global energy supplies. Amidst this, former U.S. President Donald Trump retreated from a proposal to impose a 20% tariff on shipments passing through the Strait of Hormuz, announcing he would replace the plan with trade and investment agreements with Gulf states. This reversal followed criticism from the International Maritime Organization of the United Nations and concerns in oil markets where one-fifth of global supplies rely on passage through the strait.

Al Rajhi Bank Shares Support a Partial Recovery in Saudi Tadawul