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Gulf markets plummet on Iran plans

Stocks across the Middle East tumbled as the easing of sanctions against Iran raised the prospect of a surge in oil supplies to a market already reeling from the lowest prices in more than a decade. Shares in Tehran gained.

Saudi Arabia’s Tadawul All Share Index dropped 5.4 percent to its lowest level since March 2011. Abu Dhabi’s ADX General Index fell into a so-called bear market. The Bloomberg GCC 200 Index, which tracks 200 of the six-nation Gulf Cooperation Council’s biggest companies, traded at 9.5 times estimated 12-month earnings, the lowest in almost seven years.

Iran, home to almost 10 percent of the world’s proven oil reserves, is starting preparations to boost exports after the United Nation’s nuclear agency on Saturday said the country has complied with the terms of an international agreement to curb its nuclear program. That threatens to put further pressure on prices, hurting the oil-dependent economies of the GCC.

 “Iranian oil supply will come to the market as early as today or tomorrow,” said Nayal Khan, the Riyadh-based head of institutional equities sales trading at Saudi Fransi Capital. “The market’s recovery will depend on whether we can get oil back above $30.”

Iran is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said on Sunday. It plans to add another half million barrels within months.

Concern that Iran may exacerbate the global supply glut sent Brent crude, a benchmark grade for more than half the world’s oil, to a new 12-year low on Friday, helping to spur a global stock rout. The Standard & Poor’s 500 Index fell to the weakest level since Aug. 25 in the worst start to a year for U.S. equities on record. Emerging-market stocks posted a third straight weekly decline, dropping to the lowest level since 2009.

The countries of the GCC account for about 30 percent of the world’s proven oil reserves.

The Bloomberg GCC 200 Index plunged to the weakest level since March 2011 as every benchmark gauge in the region fell.

“Oil breaking below $29 oil price has urged more investors to sell,” said Talal Touqan, the head of research at Abu Dhabi-based Al Ramz Securities.

Qatar’s QE Index tumbled 7.2 percent, the most since December 2009, and Abu Dhabi’s ADX General Index slumped 4.2 percent to the lowest level since November 2013. It has declined 23 percent since a peak in July. Dubai’s DFM General Index lost 4.6 percent in the highest trading volume this year.

Oman’s MSM 30 Index fell 3.2 percent, the most since December 2014, and Kuwaiti stocks also dropped 3.2 percent to the lowest level since May 2004. Bahraini equities slipped 0.4 percent.

Oil Stability

While Saudi Oil Minister Ali al-Naimi is optimistic that market stability will return, it will take time, he said at a news conference in Riyadh on Sunday.

Bonds across the Gulf region slumped on Friday. The yield on Saudi Electricity Co.’s April 2043 securities surged 32 basis points, the most on record, to 6.93 percent. In the absence of dollar-denominated sovereign debt in Saudi Arabia, some investors use the company’s bonds as a proxy because the state owns more than 70 percent of the energy operator.

The yield on Qatar government’s debt due January 2020 bond climbed 14 basis points to 2.97 percent, and the rate on Dubai’s notes due April 2029 increased 23 basis points, prices compiled by Bloomberg show.-Bloomberg