Arab Markets Hit 3-Year Low as US Tariff Threats Rattle Investors

Middle East stocks have plunged to their lowest levels since 2020. Arab markets are tumbling as US trade tensions escalate and global economic uncertainty grows. The Saudi Arabian benchmark Tadawul All Share Index saw a steep 5.06 percent decline. Qatar’s QE Index dropped by 4.13 percent. These regional market troubles coincide with the S&P 500’s worst decline in 70 years that wiped out $5 trillion in market value. Oil prices have fallen 7 percent to a three-year low. This drop significantly affects Gulf economies where petroleum exports play a vital role. Gulf Cooperation Council countries might face milder effects because of their limited US export exposure. However, the new 10 percent reciprocal tariff on Gulf imports has created widespread concern in Middle Eastern financial markets.

Gulf Markets Plunge as Trump Imposes Sweeping Tariffs

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US President Donald Trump’s sweeping tariff announcement sent Gulf stock exchanges into their steepest decline in years. The markets reacted strongly to the new 10% duty on all imports, whatever their source. This move sparked concerns about a possible trade war and global recession.

Saudi Tadawul Records Worst Day Since 2020

The Saudi stock market took a massive hit Sunday, dropping 6.78%. This marked its poorest performance since COVID-19’s early days. The Tadawul All Share Index lost over 800 points. Market value shrank by more than 500 billion riyals (about AED 488.37 billion) in just one trading session.

The market collapse hit every major sector hard. Utilities fell 8.4%, banks dropped 6.9%, telecommunications declined 5.9%, and energy tumbled 5.29%. Saudi Aramco, the life-blood of the kingdom’s economy, saw its shares dive 6.2%. This wiped more than 340 billion riyals from the energy giant’s value. The company hadn’t seen such a big daily drop since the 2020 pandemic began.

The banking sector also felt the pain. Al Rajhi Bank’s shares fell 5.9%, and the country’s largest lender, Saudi National Bank, retreated 6.8%.

Kuwait and Qatar Indices Drop Over 5%

Kuwait’s market followed the regional trend and ended 5.7% lower. The Premier Market Index slid to 8,154.08 points with a 5.13% drop. The General Market Index also fell 4.85% to 7,610.58 points.

Qatar’s benchmark index resumed trading after a five-session Eid break and tumbled 4.2%. Industries Qatar, the petrochemical maker, saw an 8.2% plunge. The Gulf’s biggest lender, Qatar National Bank, dropped 4%. Reports showed Qatar’s stock index fell as much as 5.26% to 9,685.7 points at market opening.

Banks in Gulf markets suffered heavy losses. Market watchers worried that a US recession might spread worldwide.

UAE Markets Prepare for Sunday Opening

UAE markets showed trouble signs early. Dubai’s benchmark fell 1.7% Thursday before the weekend. Blue-chip developer Emaar Properties led the decline with a 9.7% drop – its biggest single-day fall since March 2020.

Abu Dhabi’s index decreased 0.8%. The FTSE ADX General Index fell 0.821%, while the DFM General Index dropped 1.663% at Thursday’s close. Oil prices added extra pressure on UAE stocks by falling 6% after OPEC+ announced faster unwinding of output cuts.

Oxford Economics experts predicted these measures would push the effective US tariff rate to almost 30%. This rate matches levels not seen since the 1930s.

Oil Price Collapse Compounds Middle East Economic Woes

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Oil prices have fallen to three-year lows this week. This collapse adds to the economic challenges Middle Eastern nations face as they deal with stock market turmoil. The steep drop in crude prices coincides with a growing global trade war and unexpected production decisions by major oil producers. These factors create a perfect storm for regional economies that heavily depend on petroleum exports.

Brent Crude Hits Three-Year Low

Brent crude, the international standard, took a nosedive of more than 11% in just two days. The price crashed from AED 271.72 per barrel at the start of the week to about AED 242.35. Prices fell even further to AED 240.81 by Friday’s close. This marks the steepest percentage loss in 18 months with a 10.9% weekly decline.

China’s announcement of 34% retaliatory tariffs on all American goods, starting April 10, accelerated the sell-off. This decision, combined with Trump’s sweeping global tariffs, raised widespread fears about slower global economic growth and reduced oil demand. The impact hit West Texas Intermediate crude even harder, which dropped 7.4% to AED 227.62 a barrel.

Market experts warn that oil prices might drop to AED 183.60 per barrel as global economic activity slows down. This poses a significant threat to Gulf economies where petroleum remains a vital revenue source, despite their efforts to diversify.

OPEC+ Supply Boost Decision Backfires

Market pressures increased when OPEC+ surprised the energy world by announcing it would triple its planned output increase for May. Eight key OPEC+ producers agreed to raise their combined crude output by 411,000 barrels per day. This number is a big deal as it means that the original expectation of 135,000 bpd.

Saudi Arabia’s decision marks a complete reversal from its previous strategy of restricting supply to support prices. Notwithstanding that, the kingdom seems to be changing its approach, possibly to punish “free riders” like Kazakhstan and Iraq that have exceeded their production quotas.

The announcement’s timing proved disastrous as it aligned with Trump’s tariff announcement. This created a “very bad combo” as supply-demand fundamentals turned “comfortably negative”. Analysts project an oil market surplus that might exceed 900,000 bpd in 2025. This outlook puts additional downward pressure on prices that Gulf nations depend on for their budget stability.

Key Sectors Face Varying Degrees of Disruption

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Tariff announcements sent shockwaves through Middle Eastern economies’ key sectors. Financial services and energy companies took the hardest hits. Companies across sectors showed their vulnerabilities as investors started to rethink growth prospects amid global slowdown fears.

Banking Stocks Lead the Decline

Gulf’s banking stocks bore the brunt of market reactions with steep losses across financial institutions. Al Rajhi Bank’s value dropped 5.9%, and Saudi National Bank fell 6.8%. These numbers showed how deeply investors worried about liquidity pressures. Qatar National Bank’s 4% decline proved the banking sector’s weakness against global economic headwinds.

Banking experts warned that global uncertainty could disrupt investment flows in the region. Countries with US dollar-pegged currencies—including Saudi Arabia and the UAE—became more vulnerable to tight monetary conditions. This situation could trigger capital outflows and make the sector’s liquidity challenges worse.

Real Estate Developers See Market Value Erode

The market saw real estate giants lose substantial value. Emaar Properties took an 8.9% hit, its worst intraday performance since November 2021. Emaar Development dropped 2.4%. IFA Hotels and Resorts and Al Tijaria ranked among the market’s biggest losers.

Market sustainability concerns already existed in this sector. Analysts had started to question the UAE’s real estate boom’s sustainability before the tariff announcement. Some predicted price corrections would follow.

Energy Giants Like Aramco Lose Billions Despite Tariff Exemptions

Aramco’s shares tumbled 5.3%, marking its biggest single-day drop since March 2020. The company’s market value shrank by AED 323.13 billion. This happened even though the White House kept oil and gas imports free from new tariffs.

Gulf exporters face serious consequences. Oil exports might be safe, but petrochemicals and aluminum now cost more, which squeezes profit margins. Major energy companies must also deal with potential disruptions in global trade flows.

Retail and Hospitality Brace for Impact

The retail and hospitality sectors prepare to face tough challenges. Industry leaders acknowledge regional tensions might affect business, though many stay optimistic. Tourism numbers had looked promising—UAE hotels welcomed 15 million guests in 2025’s first half, showing a 10.5% increase from 2023.

Market analysts warn that several sectors face pressure even without direct tariff effects. Electronics, automobiles, and construction might see rising costs. These increases could affect consumer spending and push inflation higher.

Gulf Governments Scramble to Formulate Strategic Responses

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Gulf authorities are quickly creating strategic responses as trade tensions and market volatility put economic stability at risk. Oil prices continue to fall and global growth looks dim. Governments must protect their economies while dealing with an increasingly complex geopolitical world.

Economic Diversification Plans Under Threat

Saudi Arabia’s Vision 2030 and similar Gulf initiatives face a tough challenge from falling oil prices. The kingdom needs oil prices near AED 352.51 per barrel to balance its 2024 budget, which sits well above current levels. Trade wars could slow down economies in China and Europe. This would weaken crude oil demand and put both fiscal stability and large-scale economic projects at risk.

Major Gulf businesses have stressed the importance of flexibility and regional expansion. DP World captured this reality perfectly: “With tariffs increasingly shaping policy, we recognize that businesses are facing significant adjustments”. These developments have sped up efforts to protect supply chains from future trade uncertainty.

Potential Fiscal Policy Adjustments

Current challenges have made fiscal consolidation urgent. Gulf authorities now focus on:

• Building fiscal buffers to improve their response to economic shocks
• Carefully adjusting fiscal policies without hurting growth
• Growing tax bases as economies tap into new sectors

Gulf nations have an advantage with some of the lowest break-even oil prices regionally. This provides them extra protection if prices stay weak.

Diplomatic Outreach to Washington

Strategic investment has become a tool for diplomacy amid these challenges. The UAE and Saudi Arabia have committed AED 7.34 trillion to US investments over the next several years. This strategy helps maintain strong ties with Washington while building new international partnerships.

GCC countries are joining forces with new groups. Saudi Arabia, the UAE, and Egypt now have stronger connections with BRICS and the Asian Infrastructure Investment Bank. This balanced approach helps reduce dependence on Western trade systems. It also positions Gulf states as open economies in an increasingly protective world.

Gulf financial markets are experiencing major disruptions as trade conflicts and unstable oil prices reshape the region’s economy. The losses in market value across major Gulf stock exchanges now exceed AED 1.2 trillion. Stock indices have dropped to their lowest points since 2020. Major markets including Saudi Arabia’s Tadawul, Qatar’s QE Index, and Kuwait’s Premier Market show steep declines that highlight growing investor worries.

Gulf nations have strong financial reserves, but dropping oil prices pose risks to their economic stability and plans to diversify. The banking sector raises particular concerns. Leading banks like Al Rajhi Bank and Qatar National Bank have seen their stock prices fall sharply. Property developers such as Emaar Properties also struggle with market uncertainty.

The response from Gulf governments includes careful budget adjustments and diplomatic outreach. Saudi Arabia, the UAE, and other GCC members now build economic ties beyond their traditional Western partners. This shows how they adapt to new global trade realities. These countries speed up their internal reforms, but success largely depends on stable oil income and smart policy choices.

Market experts predict more instability through 2025 as global trade tensions continue. Gulf economies must handle both immediate challenges and long-term goals. Regional leaders work to build stronger economies while dealing with an increasingly complex global situation.