Dubai shares retreat as earnings deepen market caution

Dubai stocks ended lower on Friday as disappointing corporate earnings and escalating tension around the Strait of Hormuz weighed on investor sentiment, while Abu Dhabi’s benchmark managed a marginal gain.

The Dubai Financial Market’s main index fell 0.4%, extending losses for a second consecutive session. Air Arabia and contractor ALEC Holdings were among the biggest drags after their quarterly results disappointed investors. Emaar Properties also weakened, adding pressure to the benchmark. Abu Dhabi’s index edged 0.02% higher as gains in selected industrial and technology stocks offset weakness elsewhere.

Air Arabia dropped 4.1%, its steepest decline in more than three months, after the low-cost carrier reported a sharp fall in second-quarter profitability. Net profit for the quarter plunged about 75% from a year earlier to AED87.9 million, reflecting the impact of severe disruption to regional aviation and operating conditions during the continuing Middle East conflict.

The airline’s weaker performance highlighted the growing financial cost of geopolitical instability for Gulf companies whose operations depend heavily on unrestricted airspace and predictable passenger flows. Airlines across the region have faced route changes, cancellations and higher operating expenses as conflict has complicated flight planning and affected travel demand.

ALEC Holdings fell 4.4% and touched its lowest level in about four months. The Dubai-listed construction group swung to a second-quarter loss of roughly AED16 million, compared with a profit in the corresponding period a year earlier. The setback came despite strong revenue growth, underlining pressure from project disruption and higher costs associated with regional instability.

ALEC’s quarterly revenue climbed above AED4 billion, supported by a large construction pipeline. Its earnings, however, were affected by disruption to offshore energy work and additional project expenses. The contrasting movement between rising revenue and falling profit reinforced investor concerns over margins among contractors exposed to complex regional projects.

Emaar Properties, one of Dubai’s most heavily weighted companies, slipped about 0.5%. The decline added to pressure on an index that had already been navigating renewed geopolitical risk after strong gains earlier in the year. Dubai finished the week around 1% lower.

Markets were also assessing Washington’s warning that its naval blockade of Iran could be maintained indefinitely if diplomatic efforts remain stalled. US officials have signalled that economic pressure on Tehran could intensify, while shipping through the Strait of Hormuz has been sharply disrupted.

The strait remains one of the world’s most important energy corridors, carrying roughly a fifth of global oil supplies under normal conditions. Restrictions on maritime traffic have therefore amplified concerns about energy costs, freight rates and the movement of goods between Gulf states and international markets.

Those concerns intensified after two vessels operated by ADNOC were attacked while travelling through the Strait of Hormuz. The UAE blamed Iran for the attacks and condemned them as a threat to freedom of navigation. No casualties were reported. The incidents contributed to another slowdown in shipping movements through the waterway.

ADNOC Gas shares declined 0.9% in Abu Dhabi as investors weighed the implications of the maritime security deterioration for the broader energy sector. The benchmark nevertheless remained marginally positive, helped by stronger performances elsewhere.

Orascom Construction rose 1.8% after reporting quarterly profit of $61.9 million, an increase of about 74% from a year earlier. Space42 also advanced, helping the Abu Dhabi index resist the wider risk-off pressure affecting regional equities. Abu Dhabi finished the week about 0.5% lower.

Oil prices moved higher as the maritime confrontation raised fears of further supply disruption. Brent crude settled at $88.52 a barrel, gaining $1.45, while West Texas Intermediate ended at $82.40, up $1.15. Brent gained about 6% over the week and WTI advanced roughly 5.4%.