Gulf financial markets witnessed sharp declines at the start of trading in recent days, affected by a global downturn resulting from the escalating tariff crisis led by the US. This sharp decline occurred amid growing uncertainty about the future of the global economy. The economies of the Gulf states continued to deteriorate, coinciding with a sharp decline in oil prices. These states rely primarily on oil revenues to finance their government spending.
The UAE markets were the most affected, with the Dubai Financial Market (DFM) index falling by more than five percent, while the Saudi TASI index fell below the 11,000-point mark for the first time since November 2024. The wave of losses also extended to the markets of Kuwait, Qatar, Bahrain, and Oman, reflecting the state of anxiety prevailing among investors.
These declines were not limited to the Gulf, however. Global markets also experienced their worst performance since the 2008 financial crisis. Oil prices fell to their lowest levels in more than four years, reinforcing a climate of risk aversion and hesitation in making investment decisions.
In this context, Mohammed Makni, a Saudi professor of finance and investment, said: "The sharp decline witnessed by Gulf markets clearly reflects the extent of the connection between the Gulf economies and international fluctuations." He warned that recovery would remain contingent on positive signals from major economic powers, most notably the US.
Makni explained this decline was because of uncertainty among investors because of US trade policies, particularly tariffs. These affect supply chains, raise costs for companies, and increase unemployment rates, leading to a decline in spending and consumption, and hence in the performance of financial markets.
The professor of finance and investment also said that Gulf markets, are highly sensitive and react quickly to these changes, especially those with strong trade ties to the Gulf. Makni believes that investors' behaviour, which is moving toward heavy selling, is a logical reaction in an unstable economic climate.
Makni emphasised that the nearly seven percent decline in the Saudi market, and the Kuwaiti market by about six percent, along with UAE markets, reflects the impact of the crisis. He warned that this trend is likely to continue unless the US administration takes the initiative to calm tensions or open channels of negotiation with its trading partners.
Makni also emphasised that the crisis extends beyond the region, as its repercussions extend to global markets, including the US, Japan, and the European Union, given the interconnectedness of the global economy. He described the recent sharp decline as unexpected in this magnitude, but rather a natural result of the uncertainty governing the investment landscape.
The Saudi academic concluded his remarks by emphasising that any anticipated recovery will take time and cannot be achieved without an improvement in the economic environment and positive news from the US in particular. This follows the primary source of this crisis following Trump's recent announcement of tariffs which have been imposed on most countries. Even if the impact the pace of recovery will be gradual, contingent on the return of confidence to markets and the stability of global policies.