Al-Markaz: Kuwaiti Stocks Remain Stable Amid Turmoil
The Kuwait Finance House (KFH), referred to as “the Center” in the report, stated in its monthly market performance report for September 2026 that the Kuwait Stock Exchange maintained its performance during September, recording a milder decline compared to other regional markets. This occurred against a backdrop of an unfavorable global and regional investor climate, pressured by the first interest rate hike by the US Federal Reserve in over three years, a sharp rise in global bond yields, and interest rate increases approved by the Central Bank of Kuwait, coinciding with stalled peace efforts between the United States and Iran and the continued closure of the Strait of Hormuz.
Meanwhile, Kuwait’s non-oil private sector continued its growth for the second consecutive month in August, with the S&P Global Purchasing Managers’ Index (PMI) rising to 53.6 points, up from 50.8 points in July, marking its highest level since February. This growth was supported by strong expansion in production and new orders.
The local credit market performance rose by 0.9% month-on-month and 5.1% year-on-year in August, bolstered by a recovery in lending activity by banks and financial institutions. Credit extended to households continued to grow by 0.7% monthly and 4.7% annually, while credit to companies increased by 0.4% monthly and 6.6% annually. Additionally, deposits held by expatriates rose by 0.7% month-on-month and 8.4% year-on-year.
The report noted that Gulf markets declined in September, with the S&P GCC Composite Index falling by 3.7%, amid pressure on investor sentiment due to an interest rate environment less supportive of markets and escalating geopolitical tensions. The first US Federal Reserve rate hike since 2023 prompted most Gulf central banks, including those in Saudi Arabia, the UAE, Qatar, Oman, and Bahrain, to raise interest rates by 25 basis points, aligning with US monetary policy and increasing borrowing costs.
Regarding Gulf economic activity, non-oil PMI indicators for Saudi Arabia and the UAE rose in August, supported by improved demand and project activity. The Saudi index climbed to 53.8 points, up from 53.1 in July, reaching its highest level in six months. The UAE index also rose to 55.3 points, compared to 52.7 in July, marking its strongest reading since December 2024.
Data released by the General Authority for Statistics in Saudi Arabia showed that actual GDP contracted by 4.7% year-on-year in the second quarter of 2026, marking the first annual decline in two and a half years.
The report indicated that global and US stock markets declined in September, with the S&P 500 falling by 0.5% and the Morgan Stanley Global Index dropping by 1.3%. Markets faced pressure from US jobs data for August.
The report highlighted that US Treasury bond yields surged sharply in September, driven by a broad wave of bond sales triggered by Federal Reserve tightening, rising inflation risks due to higher energy prices, and continued government debt issuance. The yield on 10-year bonds rose by 56 basis points to 5.29%, reaching its highest level since 2007, while the yield on 30-year bonds increased by 42 basis points to 5.64%, reaching levels not seen in over two decades. This trend was reinforced by the Federal Reserve’s updated forecasts and its view that financial conditions have not yet tightened sufficiently, leading markets to price in a longer tightening cycle, with cumulative interest rate hikes expected to approach 100 basis points over the next twelve months.
On the other hand, Brent crude oil prices rose by 14.4% in September to $103.5 per barrel, remaining above the $100 mark for much of the month amid escalating supply risks. Geopolitical tensions in the region contributed to the rise in oil prices at the beginning of the month. Furthermore, the postponement of talks between Gulf Cooperation Council (GCC) countries and Iran, and President Trump’s rejection of Iran’s conditional proposal to reopen the Strait of Hormuz, diminished prospects for near-term de-escalation.
Conversely, gold prices fell by 6.6% during the month to $4,156.0 per ounce, hitting their lowest level since early August, as higher real yields and a stronger US dollar negatively impacted the appeal of non-yielding assets.
In conclusion, the report predicted that global investors would focus on US inflation and labor market data, as well as the Federal Open Market Committee meeting in October, seeking indicators regarding the Federal Reserve’s monetary tightening path. Bond market volatility indicators remain a key factor influencing equity valuations. Global stock performance will also be affected by the release of Q3 2026 corporate earnings, which will test whether AI-driven demand and the strength of the technology sector can offset the impact of higher interest rates. In Gulf countries, markets will be influenced by oil prices, US-Iran negotiations, and prospects for resuming trade flows through the Strait of Hormuz, factors that will continue to shape investor sentiment.
