(MENAFN) Most stock markets in the Gulf region closed lower on Wednesday, extending losses from the previous session, as officials from the US Federal Reserve signaled that interest rates are likely to remain elevated for an extended period. The remarks from senior Fed officials, including Chairman Jerome Powell, on Tuesday provided no indication of imminent rate cuts, instead emphasizing the continuation of monetary policy tightening, which dashed investors' hopes for significant reductions in borrowing costs this year.
Given that most Gulf currencies are pegged to the dollar, any changes in US monetary policy typically prompt corresponding adjustments in Saudi Arabia, the UAE, and Qatar. This alignment further accentuates the impact of Fed policy decisions on Gulf markets.
In Saudi Arabia, the main index declined by 0.3 percent, with shares of the National Bank of Saudi Arabia, the kingdom's largest bank, experiencing a 1.8 percent drop. Meanwhile, data released by the Joint Data Initiative (JDI) indicated an increase in Saudi Arabia's crude oil exports in February, rising to 6.317 million barrels per day from 6.297 million barrels per day in January.
Dubai's main index also fell by 0.3 percent, influenced by a 1.1 percent decrease in the shares of Salik Traffic Collection Services Company. Similarly, the Abu Dhabi index experienced a 0.3 percent decline.
Amidst these market movements, tensions in the Middle East remained elevated, with Israel vowing to respond to an Iranian attack earlier in the week despite international calls for restraint. These geopolitical dynamics add to the uncertainty surrounding the region's financial markets.
Furthermore, oil prices, a significant catalyst for Gulf markets, declined for the third consecutive session. Factors contributing to this downturn included the possibility of increased US commercial inventories, as well as weak economic data from China. Additionally, dwindling prospects of interest rate cuts further exacerbated concerns about global demand, adding to the prevailing uncertainties in Gulf financial markets.
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