Middle East Markets Plunge As Oil Prices, US Tariff Shockwaves Roil Investors

Stock markets across the Middle East, including the UAE, cratered on Monday, reeling from the dual blows of aggressive US tariffs and a precipitous drop in oil prices in a dramatic unravelling dubbed a“regional bloodbath”.

The turmoil, which mirrors a global sell-off, has thrust energy-dependent Gulf economies into a precarious spotlight, threatening government budgets and ambitious economic diversification plans.

However, the Dubai Financial Market (DFM), which plunged six per cent at the opening bell, and the Abu Dhabi Securities Exchange (ADX), which tumbled four per cent in the morning significantly pared losses as markets closed.

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The DFM recovered at close ending with a decline of 3.08 while the ADX trimmed losses to 2.59 per cent.

Saudi Arabia emerged as the sole gainer among Gulf markets on Monday, with the Tadawul All Share Index rising 1.05 per cent to close at 11,194.02, up 116.83 points.

The Saudi advance stood in sharp contrast to regional peers, all of which closed in negative territory, highlighting investor confidence in the Kingdom's market despite broader pressures.

The rebound followed two consecutive sessions of losses driven by concerns over newly announced US tariffs.

Trading activity was strong, with TASI's turnover reaching SR10.5 billion ($2.8 billion), as 150 stocks advanced and 91 declined.

As markets closed, Bahrain declined 1.15 per cent. Qatar also slid 0.35 per cent, Muscat lost 0.68 per cent, and Kuwait edged down 0.64 per cent.

On TASI, the National Co. for Learning and Education was the best-performing stock of the day, with its share price surging by 8.84 per cent to SR160.

In the morning session, the DFM's flagship real estate giant Emaar Properties shed nine per cent. Emaar Development and Dubai Islamic Bank followed suit, each shedding over eight per cent and 7.5 per cent, respectively, within the first 15 minutes.

The ADX wasn't spared, tumbling four per cent as heavyweights like Adnoc Gas (down 4.9 per cent), First Abu Dhabi Bank (FAB, off 2.83 per cent), and Multiply Group (down 6.17 per cent) bore the brunt of a relentless sell-off. Banking stocks, a cornerstone of the ADX, faced particularly fierce pressure.

“Tariffs are dimming trade optimism, and oil's collapse is hurting GCC economies very hard. Oil below $65 and tariffs this aggressive could push GCC growth forecasts into negative territory,” noted James Mathew, CEO & managing partners of UHY James.

Since the US tariff announcement on April 2, the TASI has slumped over 10 per cent, with capital goods cratering 15 per cent, insurance and pharma down 14 per cent, and even resilient sectors like Reits and telecom nursing mid-single-digit losses. Saudi Aramco, the Tadawul's titan and the world's sixth-most-valuable company, saw its stock slide over five per cent on Sunday, with further declines Monday erasing billions in market cap - a direct casualty of oil's freefall.

Oil, the mainstay of the region, has taken a brutal hit. Benchmark Brent crude has plummeted nearly 15 per cent in five days, settling just above $63 per barrel - a 30 per cent plunge from last year's $90 mark. This price is well below the break-even threshold for Saudi Arabia (estimated at $80-$90) and other GCC producers, amplifying fiscal strain.

Vijay Valecha, CIO Century Financial, said recent tariff rounds have triggered a strong share sell-off as the markets are running on extreme fear right now, which translates to more conservative investor sentiments preferring safer assets over equities.“Additionally, oil prices - a catalyst for the Gulf's financial markets - are down 15 per cent over the week to a three-year low as China's tariff hikes on US goods intensified the trade war and as Opec+ unexpectedly sped up oil output hikes.”

The new tariffs are expected to increase the subjective odds of a recession in the next 12 months as they could boost inflation more than assumed, weighing on real disposable income, cutting into spending, and ultimately slowing down economic growth.“Further, financial market conditions could likely tighten, and the risk of equity price declines could hit consumers via the wealth effect,” said Valecha.

Sajith Kumar, CEO and managing director of IBMC Financial Professional Group, said as the world's top two economies engage in a high-stakes showdown, global markets are preparing for increased volatility.“The economic battle between these two giants is having far-reaching consequences, impacting economies and investors worldwide. To navigate this uncertain landscape, savvy investors in the UAE will need to stay informed, separate signal from noise, and identify the hidden opportunities that emerge amidst the market turbulence.”

The US imposed 10 per cent tariffs on GCC states - the UAE, Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar- while Iraq faced 39 per cent and Syria 41 per cent.“These measures, paired with expected retaliation, could destabilise global trade predictability,” warned PwC in a client advisory.

Compounding the crisis, Opec+ - including the UAE, Saudi Arabia, Russia, Algeria, Iraq, Kazakhstan, Kuwait and Oman - agreed last week to accelerate oil output hikes , marking the first increase since 2022.

Emirates NBD Bank of Dubai noted:“Opec+'s shift to monthly targets, with higher output slated for May, will inject volatility into oil markets already reeling from tariff fallout.” The decision has drawn ire, with critics arguing it is ill-timed amid weakening demand signals.

Josh Gilbert, market Analyst at eToro, said over 50 nations have already been trying to negotiate deals with the White House, which could be a key driver of market movement this week if deals are struck and Trump rolls back on some of his tariffs.“However, Trump's message that no policy changes are planned to address the current sell-off, shows that we could see further downside ahead this week.”

Despite the gloom, UAE markets have been a bright spot since April 2022, riding an IPO boom that lured droves of new investors - many untested by the Covid-era downturns. Foreign inflows into GCC equities remain robust, with Iridium Advisors reporting $2.47 billion in February, up from $939 million in January and more than double the $890 million from February 2024.

The Middle East's economic outlook hangs in a balance as investors await signs of stabilisation - or further chaos, analysts noted.

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