In the United Arab Emirates’ bustling metropolis of Dubai, stock markets across the Middle East encountered significant downturns on Monday. This sharp decline is attributed to the United States’ newly implemented tariff policy coupled with a drastic fall in oil prices, creating financial turmoil for energy-reliant nations in the region.
Over the last five days, Brent crude oil has seen a staggering drop of almost 15%, plummeting to just over $64 per barrel. This marks a near 30% decline compared to prices from a year ago when a barrel exceeded $90. Such a price point is not only substantially lower than the required break-even for Saudi Arabia and other similar energy-producing countries but also intensified by the newly imposed tariffs. The Gulf Cooperation Council states—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE—face 10% tariffs, while other nations like Iraq and Syria encounter tariffs as high as 39% and 41%, respectively.
The accounting firm PwC highlighted in a client advisory that these developments might jeopardize the stability and predictability of international trade, potentially provoking retaliatory measures from affected countries. This economic uncertainty has resulted in widespread losses throughout the region.
The Dubai Financial Market experienced a sharp fall of 6% at the start of the week. However, it managed to recover slightly, ending the day down by 3%. Emaar Properties, a leading player on the exchange, initially dropped by 9% but closed down 2.5%. Similarly, the Abu Dhabi Securities Exchange faced an initial drop of up to 4% before settling 2.5% lower by the day’s end.
Other regional markets that commenced trading on Sunday were also not spared. Saudi Arabia’s Tadawul stock exchange recorded a plunge exceeding 6% but managed to rebound slightly on Monday with a 1% gain. The Saudi state-owned oil giant Aramco witnessed a more than 5% decrease on Sunday, leading to the loss of billions in market value. However, Aramco shares rose by 1.5% on Monday, highlighting the volatility.
These fluctuations in Aramco’s shares are intricately linked to the global oil price trend. Last week, OPEC+ countries like Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the UAE decided to expedite the release of additional oil into the global markets. This month signifies the group’s first oil production escalation since the previous year. Analysts at the Emirates NBD Bank of Dubai note the group’s shift from a gradual increase in production to ambitious monthly targets for higher output as a response to the economic impact from U.S. tariffs.
An economic outlook presented by James Swanston from Capital Economics indicates a challenging path for Gulf states as they anticipate difficult times ahead, specifically in 2025. “Given the present circumstances, governments may have to reduce fiscal support and, in countries like Saudi Arabia, Bahrain, and Oman, possibly adopt austerity measures, including spending cuts and raising non-oil revenues through taxation,” he explained.
Across the Gulf, the Qatar Stock Exchange decreased by over 4% on Sunday, with minor adjustments on Monday. Boursa Kuwait fell by more than 5% during Sunday’s trading and saw slight continued declines into Monday.
Beyond the Middle East, financial markets in other nations like Pakistan also faced downturns. The Pakistan Stock Exchange saw a steep drop on Monday as the country faces 29% tariffs from the United States. Islamabad’s market halted trading for an hour following a 5% dip in its KSE-30 index, finalizing the day with a loss of 3.3%.
Mohammed Sohail, the chief executive at Topline Securities, remarked, “We may continue to face this situation until the uncertainty in global markets subsides.” Meanwhile, Pakistan’s Finance Minister Muhammad Aurangzeb announced plans to dispatch a delegation to the United States to engage in negotiation talks. The U.S., which imports approximately $5 billion in textiles and other goods from Pakistan, plays an important role given Pakistan’s reliance on loans from the International Monetary Fund and other creditors.