Gulf markets have experienced sharp divergence since the onset of the Iran war, with Oman and Saudi Arabia outperforming while Dubai has struggled. Since March 1, Oman's index surged 9.3% and the Saudi Tadawul advanced 5.8%, whereas Dubai's DFM General Index plunged nearly 16%, Qatar slid 4%, and Bahrain's BAX fell 7.2% [1]. The volatility in oil prices and ongoing geopolitical turmoil have significantly influenced investor sentiment, with inflation remaining a persistent risk for the region's dollar-pegged economies [1].
Saudi Arabia's market, closely tied to energy prices, has benefited from the spike in oil prices, with Brent crude hovering around $100 a barrel and reaching $110 per barrel on Friday afternoon. U.S. West Texas Intermediate futures for May delivery have remained firmly above $95 [1]. Saudi Aramco's ability to export oil via pipelines into the Mediterranean, bypassing the Strait of Hormuz—a critical flashpoint in the conflict—has been highlighted as a strategic advantage [1]. Oman has attracted investors seeking safe havens, bolstered by its Vision 2040 initiative aimed at reducing dependency on oil [1].
Dubai's index saw a slight recovery this week, rising 4.2% on Wednesday—its biggest intraday advance since December 2024—driven by gains in real estate and bank stocks. It closed the week up 2.4% [1]. Despite this rebound, strategists like Damanick Dantes urge caution, warning that rebounds may be short-lived and advising investors to focus on quality assets with resilience in uncertain market environments [1].
Dantes also noted ongoing investor interest in Saudi Arabia's pre-IPO space, suggesting that while caution is warranted, there are still selective opportunities for risk-taking in the region [1].
CONCLUSION
The Iran war has caused significant divergence in Gulf markets, with Saudi Arabia and Oman outperforming due to oil price surges and safe-haven demand, while Dubai and other regional indices have lagged. Elevated oil prices and geopolitical risks continue to shape investor sentiment, prompting strategists to recommend caution and focus on resilient assets. Despite the uncertainty, pockets of opportunity remain, particularly in Saudi Arabia's pre-IPO sector.