Gulf markets reel as Saudi stocks slump over 4% at open

Saudi Arabia’s benchmark Tadawul All Share Index suffered a sharp sell-off at the open of trading on Sunday, with equities tumbling more than 4 per cent as geopolitical conflict tied to escalating tensions involving Iran and Western forces rattled investor confidence across the Gulf. Traders dumped risk assets within the first minutes of trading, driving the benchmark down to levels not seen in months and signalling heightened fear over regional stability and economic outlook. Gulf financial markets have been under intense pressure amid coordinated military strikes and retaliatory actions that have disrupted air and sea routes, prompting risk-off sentiment among global investors.

The steep opening decline was led by heavyweights including Saudi Aramco, Al Rajhi Bank and Saudi National Bank, with broad-based losses cutting deeply into market capitalisation. Activity was marked by unusually high volatility and elevated trading volumes, as portfolio managers reassessed exposure to Gulf equities amid heightened geopolitical risk and uncertainty over oil supply chains. The rout was part of a wider pattern across regional markets, with some exchanges shuttering trade or suspending operations in response to the geopolitical shock.

Investors in the UAE endured a rare interruption to market functioning when both the Abu Dhabi Securities Exchange and Dubai Financial Market were ordered shut for two days, a move aimed at allowing financial authorities to gauge the scale of regional disruptions and investor reactions. That decision has kept billions of dollars in listed assets in suspension while traders await clarity on unfolding events. Other regional indices, such as Oman’s and Egypt’s, also posted significant declines when they opened.

Underlying the market downturn is a broader conflict dynamic that began with coordinated strikes by U. S. and Israeli forces against key targets in Iran, including the killing of Iran’s Supreme Leader, and was met by Iranian retaliatory missile and drone attacks across Gulf cities and critical infrastructure. The strikes have triggered widespread disruptions that have touched civilian airports, ports and residential areas, amplifying concern about prolonged instability and its potential to derail economic activity.

Traders in Riyadh faced a punishing start as risk sentiment deteriorated sharply. Analysts noted that the opening plunge represented the most aggressive sell-off in several months, with the market shedding value at a pace reflective of broad risk aversion among institutional and retail investors alike. Cash was notably reallocating into traditionally defensive assets such as U. S. Treasuries and gold as the conflict claims more attention and as crude oil prices surged on fears of disrupted supply via the Strait of Hormuz—a chokepoint through which a material portion of global oil shipments transit.

Market strategists highlighted that the rout was not confined to Saudi Arabia. Kuwait’s bourse suspended trading altogether under what regulators described as “exceptional circumstances,” while the Qatar Exchange remained closed for a bank holiday as the shockwaves spread across the region’s financial landscape. Even when equities have been tradable, the narrative has shifted toward defence-oriented plays and low-volatility stocks, as investors seek shelter from the turbulence.

While some Gulf equities have shown pockets of resilience, particularly energy exporters benefiting from higher oil prices, banking and financial stocks bore much of the brunt of the sell-off. The divergence across sectors reflects a market grappling with conflicting signals: oil producers stand to gain fiscal muscle from elevated commodity prices, but broader economic activity and investor appetite for risk are being undermined by instability.

Crude benchmarks have climbed sharply as traders price in the potential for supply disruptions, lifting energy equities in some cases even as broader indices slide. Brent crude futures, a key global oil benchmark, have jumped amid fears that ongoing strikes and retaliatory actions could constrain regional output or hinder shipping through strategic passages. That dynamic has introduced an added layer of complexity to market behaviour, as energy stocks provide some cushion against losses even while overall sentiment deteriorates.