The photo shows a view of the Dubai skyline on September 12, 2024.
Giuseppe Cacasse | AFP | Getty Images
Markets across the Gulf region have diverged widely since the Middle East conflict began, with investors weathering wild swings in energy prices and markets still reeling from geopolitical turmoil.
Saudi Arabia and Oman both outperformed other regional indexes, with Oman’s index up 9.3% and Saudi Arabia’s Tadawul index up 5.8% since March 1, the day after war began on February 28. In contrast, Dubai’s DFM composite index fell nearly 16% over the same period, Qatar’s fell 4% and Bahrain’s BAX fell 7.2%.
Damanik Dantes, founder of Dantes Outlook, said Oman was benefiting from investors looking for a safe haven, as the Saudi index, which is closely correlated with the energy market, has soared due to soaring oil prices.
In contrast, Dantes said the United Arab Emirates, which is sensitive to the property market and broader geopolitical events, has been hit the hardest.
Dantes told CNBC’s “Access Middle East” on Thursday that higher oil prices remain a positive for Saudi Arabia, where a few large energy companies dominate the market.
He highlighted Saudi Aramco’s ability to export oil to the Mediterranean via pipelines, bypassing the Strait of Hormuz, a key shipping route that has emerged as a key flashpoint in the conflict.
“I think (crude) staying above $80 a barrel is a net positive for Saudi Arabia and other energy companies in the region,” Dantes added. Brent crude oil prices have been hovering around $100 a barrel for the past week, and hit $110 a barrel Friday afternoon. US West Texas Intermediate futures (delivered in May) are also trending well above $95.
Meanwhile, Oman has been given a boost by attracting regional safe zones. Dantes said the country’s Vision 2040, which includes efforts to reduce dependence on oil, was attracting investors amid the turmoil.
The Dubai index rose slightly this week, rising 4.2% on Wednesday, its biggest intraday gain since December 2024, supported by gains in real estate and banking stocks. It ended the week up 2.4%.
Dantes called on investors in the Middle East to tread carefully and be wary of a short-term rebound.
“Now is not the time to take too much risk in your portfolio,” Dantes said. “Our focus is on high-quality assets that have the resilience to outperform in uncertain market environments.”
That said, he added, there are still plenty of opportunities to take risks. He noted continued investor interest in Saudi Arabia’s pre-IPO space, where investor risk tolerance remains relatively high and despite potential vulnerabilities, many companies are still focused on entering the market.
“We don’t want to get too defensive because anything can happen,” Dantes said of the current environment. “It is possible to have a determination that creates a huge backlash.”
Fahad Iqbal, head of investment services at UBP in Dubai, told CNBC’s “Access Middle East” on Thursday that signs of easing tensions should boost investor sentiment, but warned that a full resolution could take longer than expected.
Iqbal added that hostilities, such as attacks on energy infrastructure or water desalination, must not cross important “red lines”, saying this would be a sign of further escalation.
For Gulf countries, being pegged to the dollar remains a major inflationary risk, Iqbal said, adding that traditional safe-haven assets, namely gold, are becoming more of a risk asset, shaped by a stronger dollar and higher interest rate expectations.
“There are certainly investors out there looking to take advantage of price movements,” he said of recent market movements.
“However, at this stage we do not advise, nor have our clients, asked us to take any aggressive or very strong positions. Broadly speaking, we remain very cautious until we have a better outlook on that.”
