Share prices in the energy-rich Gulf states nosedived yesterday following a sharp decline in oil prices as Iran prepares to resume crude exports after the lifting of sanctions.
The plunge in the first day of trading in the Muslim week also follows heavy losses in global bourses on Friday, when Gulf exchanges were closed for the weekend.
The price of oil, which contributes more than 80 percent to Gulf states’ revenues, shed more than 20 percent this year to drop below US$30 a barrel. This follows a plunge of 65 percent in the past two years.
The expected return of Iran to the oil market, following the implementation on Saturday of its historic nuclear deal with world powers, will only worsen the production glut that has been the main reason for the oil price dive.
All seven Gulf bourses saw a wave of panicked sell-offs, sending indices to multi-year lows.
Big investors joined small dealers in dumping shares in fear of a further slump.
“The majority of Gulf firms depend on their governments which depend on oil revenues. No one knows the bottom of oil prices,” Kuwaiti analyst Ali al-Nemish said. “The Iranian impact on the markets appears to be somewhat inflated because Iranian crude exports will not be huge initially.”
Most of the seven markets have already lost in the past two week more than they dropped in the whole of last year.
The Qatar Exchange, the second-largest in the Gulf, plunged 7.2 percent to close trading just above the 8,500-point mark, last seen in April 2013. All the listed firms were in the red and the bourse has so far dipped 18 percent this year, more than the 15 percent it lost last year.
The Dubai Financial Market dropped 6.0 percent at the opening, but recovered slightly to close the day down 4.64 percent at 2,684.9 points, a three-year low. Since the beginning of this year, Dubai has dropped 15 percent.
The Abu Dhabi Securities Exchange also slumped 4.24 percent, but remained above the 3,700-point mark. All sectors were down with banks and real estate shedding above 5.0 percent.
The Kuwait Stock Exchange dropped 3.2 percent to just above the 5,000-point mark, levels only seen in May 2004.
Saudi Arabia’s Tadawul All-Shares Index (TASI), the largest Arab market, fell 7.2 percent to below 5,500 points during trading. The level was last seen in early 2011.
The leading petrochemicals sector dipped 8 percent, while banks lost 5.3 percent.
Since the start of this year, the TASI has dropped 21.1 percent, more than all of its losses last year. The bourse closes later in the day.
The small market of Oman dropped 3.2 percent to below 5,000 points for the first time since mid-2009. Bahrain dropped 0.4 percent. Thus far this year, the seven stock markets have shed more than US$130 billion of their market capitalization, which now stands at about US$800 billion.
All Gulf stock exchanges ended last year in negative territory.
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