Declines relatively small
Investors understand region
Gulf stock markets declined on Tuesday as the conflict between Iran and Israel intensified, although investor sentiment appears resilient.
Historically, regional geopolitical tensions have sparked sharp sell-offs on Gulf bourses as traders seek to cut their exposure. This time, however, investors seem less easily spooked and daily index declines have been relatively small.
“There’s now a much more dedicated foreign investor base here whose understanding of the region has improved significantly over the past decade,” said Ashish Marwah, chief investment officer at Abu Dhabi’s Neovision Wealth Management.
“There’s a realisation that markets like the UAE tend to act as a safe haven in such environments. Foreign investors used to be very much momentum driven. Now there’s a lot more dedicated capital which is here to stay. It’s not the ‘hot money’ of the past.”
Dubai’s index fell 0.6 percent, declining for a fourth session in five since hitting a 17-year closing high on June 10. Despite this, the benchmark is up 35 percent over the past 12 months to be among the best performers globally.
Like Monday, small-cap stocks were the most traded. This indicates that activity by institutional investors, which usually trade only large-cap companies, was low.
Abu Dhabi’s measure dipped 0.5 percent, extending its losses since last Wednesday’s five-month high to 2.7 percent.
UAE markets’ trailing price-to-earnings ratio is 15.7, according to Simply Wall St, which is elevated from a 10-year perspective.
“UAE stock valuations are stretched, but there is a huge amount of capital flow boasting growth in this market,” Marwah said. “If I’m buying a UAE stock it’s not for the dividend – yields are low.”
Saudi Arabia’s index fell 1.4 percent at 10,714 points as energy stocks slid. It is its second decline in the three sessions since Israel targeted Iran’s energy assets, to take its losses over this period to 1 percent as Monday’s rebound proved short-lived.
Saudi Aramco, the world’s largest listed oil company, fell 1.3 percent and Saudi Arabia Refineries Co dropped 1.8 percent.
Most banking stocks also declined, with Bank Albilad the standout loser as it fell 2.6 percent.
Lacklustre oil prices are diminishing the allure of Saudi stocks for foreign investors, Marwah said. Brent crude was trading at nearly $75 per barrel on Tuesday, up 12 percent in the past five days but below the 2024 average of $81.
Prior to the war between Israel and Iran, the US government was forecasting oil prices would average $66 in 2025 and $59 in 2026. Fitch Ratings expects the conflict to add a risk premium of $5-10 per barrel.
“The macroeconomic risk is significant in Saudi Arabia, largely because of oil prices,” Marwah said.
“Despite the Iran crisis, we’re unsure if crude prices are ready to run higher or stay high.
“Our view is that an oil price of $60-70 is fair for the foreseeable future. That doesn’t help Saudi Arabia meet its budget deficits, attract capital to fund non-oil activities or create a general environment of growth.”
Kuwait’s premier market index rose 0.6 percent to extend its gains this year to 10.5 percent, but Qatar’s benchmark fell 0.5 percent.
