Gulf Stock Market Investors Balance Geopolitical Risks Against Declining Supply Concerns
Gulf stock markets declined amid fears of tensions with Iran, but sentiment improved due to US oil and jobs data.
Translated by Qiyas from الجريدة — Original source
Most Gulf stock exchanges closed lower on Tuesday, as investors weighed geopolitical risks linked to US-Iran talks and ongoing disruptions in the Strait of Hormuz against easing oil supply concerns and improved risk appetite.
The Abu Dhabi index fell 0.1%, while the main Dubai index closed flat.
Sentiment was bolstered by data showing that Gulf oil flows, excluding Iran, rose in September to more than 81% of pre-war levels, supported by a recovery in Saudi exports.
This recovery came despite attacks targeting Saudi oil infrastructure and a wave of Iranian attacks on maritime navigation in the region, while exports from the Islamic Republic fell to zero under the US-imposed blockade.
Investors remain focused on geopolitical developments and US-Iran talks. Daniel Taqi-ud-Din, co-founder and CEO of Sky Links Capital, said that stalemate in diplomatic efforts could continue to weigh negatively on sentiment, especially if maritime disruptions in the Strait of Hormuz persist.
Developments in Yemen contributed to improved sentiment in Saudi Arabia, after Riyadh said Yemeni forces backed by the kingdom made rapid progress on Monday to regain control of the coast facing the Bab al-Mandab Strait up to the city of Mokha, and expelled Iran-aligned Houthis from most areas they had seized last month.
Risk appetite improved broadly after US data released on Friday showed job growth slowing more than expected in September, with downward revisions to non-farm payrolls for the previous two months, reducing expectations for near-term interest rate hikes by the Federal Reserve (the US central bank).
Nevertheless, a CME Group FedWatch tool indicates that investors have not ruled out further monetary tightening, pricing in an 87% probability of a rate hike in December. Gulf markets tend to follow changes in US monetary policy expectations, as most currencies in the region are pegged to the dollar.
