Gulf markets edge higher as diplomacy stalls

Arabian Post Staff -Dubai

Gulf bourses posted modest gains on Sunday even as hopes of a diplomatic breakthrough in the US-Israeli conflict with Iran weakened, leaving investors to balance fragile ceasefire expectations against higher oil prices, inflation risks and slowing global growth.

Trading was cautious across the region, with market moves reflecting selective buying rather than broad confidence. Saudi Arabia’s benchmark index rose 0.1 per cent, supported by gains in heavyweight financial and mining stocks. Al Rajhi Bank advanced 0.6 per cent, while Saudi Arabian Mining Co added 1.4 per cent. Rabigh Refining and Petrochemical Co surged 10 per cent after reporting its first quarterly profit in almost two years, providing one of the strongest individual moves of the session. Saudi Aramco, however, slipped 0.4 per cent, limiting the broader market’s advance.

Qatar’s main index also gained 0.1 per cent, helped by a 0.6 per cent rise in Industries Qatar. Egypt’s blue-chip EGX30 edged higher, though sentiment remained constrained by the economic drag from expensive energy imports, weakening consumer purchasing power and pressure on public finances.

The regional market performance came despite fading optimism over talks aimed at converting the February 28 ceasefire into a durable settlement. The conflict, which began with US-Israeli strikes on Iran, has already killed thousands and disrupted energy flows through one of the world’s most critical shipping corridors. Tehran has kept restrictions around the Strait of Hormuz, while Washington has maintained pressure on Iranian ports, leaving tanker movements sharply reduced and global oil supply vulnerable to further disruption.

Oil prices strengthened as traders assessed the stalled diplomacy. Brent crude moved above $107 a barrel, while US West Texas Intermediate traded near $96, levels that have revived concerns over a fresh inflation shock for major economies. The Strait of Hormuz normally carries about one-fifth of global oil and liquefied natural gas shipments, making any prolonged disruption a direct threat to fuel costs, freight rates and food prices.

The diplomatic impasse has hardened investor assumptions that the conflict may persist beyond earlier expectations. Washington has pushed for nuclear restrictions and the reopening of shipping routes, while Tehran has sought wider guarantees and relief from pressure before committing to a final arrangement. No timetable has been set for a new round of talks, adding to uncertainty in energy and currency markets.

For Gulf equities, higher crude prices present a mixed picture. Exporters benefit from stronger revenue, improved fiscal buffers and wider current account surpluses. At the same time, prolonged geopolitical tension can suppress foreign inflows, raise insurance and shipping costs, and slow non-oil activity linked to trade, tourism and logistics. That tension was visible in Sunday’s trading, where gains were concentrated in specific counters rather than spread evenly across sectors.

Investors also watched the wider global backdrop. Central banks in major economies face a more complicated policy environment as the energy shock feeds into inflation while growth expectations soften. Higher crude prices could delay interest-rate cuts, raise borrowing costs and weaken demand for imports from the Gulf and wider Middle East. Egypt, which remains exposed to energy and food costs, faces added pressure as higher import bills test efforts to stabilise inflation and maintain growth.

Saudi Arabia’s market has shown resilience due to domestic liquidity, banking strength and continued government-backed investment programmes. Yet the modest rise in the main index suggested that investors are avoiding aggressive positioning until there is greater clarity over the conflict’s direction. Banking stocks remain sensitive to interest-rate expectations, while petrochemical and industrial shares are exposed to both energy prices and global demand conditions.

Qatar’s market followed a similar pattern, with selective support from industrial names offset by caution over external risks. Stronger hydrocarbon prices may support fiscal conditions, but the broader equity market remains linked to investor appetite for regional risk. Any further escalation in the Gulf shipping corridor could weigh on sentiment even if energy revenues improve.

Egypt’s slight gain reflected a more fragile calculus. Higher oil and gas prices can strain the balance of payments and feed through to transport, food and electricity costs. The economy has already been navigating currency adjustments, inflation pressures and financing needs, making the conflict’s economic impact particularly significant.