Most major stock markets across the Gulf traded lower on Thursday morning as investors weighed falling crude prices against growing expectations that the U.S. Federal Reserve could tighten monetary policy further before the end of the year.
Oil, a key driver of economic sentiment across the region, continued its downward move, sliding toward levels seen before the recent conflict involving Iran. Market participants pointed to expectations of increased Middle Eastern supply as a stronger influence than concerns over global demand.
The decline in energy prices follows a ceasefire arrangement reached last week that helped ease tensions after the conflict involving Iran and restored shipping activity through the Strait of Hormuz, a vital route for global oil flows.
Saudi Arabia’s benchmark index slipped 0.3%, with banking stocks contributing to the weakness. Shares of Saudi National Bank, the kingdom’s largest lender by assets, fell 0.5%, weighing on the broader market.
In Qatar, equities fluctuated between gains and losses, leaving the main index largely unchanged in volatile trading.
Investor caution was also shaped by shifting expectations for U.S. interest rates. Persistent inflationary pressures, amplified by the recent geopolitical turmoil, have reinforced views that the Federal Reserve may continue its tightening cycle.
Market pricing currently reflects expectations for three additional rate increases this year, with traders assigning a significant probability to another hike as early as September.
The Gulf’s financial markets are particularly sensitive to U.S. monetary policy because most regional currencies maintain pegs to the U.S. dollar, often requiring central banks to mirror Fed decisions.
Dubai’s main index declined 0.2%, led lower by a 1.2% drop in shares of Dubai Islamic Bank.
Meanwhile, Abu Dhabi’s benchmark index also weakened, shedding 0.3% in early dealings.
Across the region, investors appeared reluctant to take on fresh risk as softer oil prices and the prospect of higher borrowing costs combined to dampen market momentum.
