The Gulf is not immune to global economic fluctuations

It has been a torrid week in the US markets. The S&P 500 has fallen 8 percent over the past month – close to correction territory – while the Dow Jones Industrial Average has lost 6 percent.

The dollar, too, has been hurt, which is of consequence to the Gulf’s dollar-pegged economies. The greenback has tumbled more than 5 percent versus the euro this year.

The volatility shows little sign of abating, driven by erratic policy-making in Washington and chronic, not to say existential, uncertainty in Europe. This has implications for us here in the Arabian Gulf.

It is not only the Trump presidency. First – a scant six weeks ago – the tech heavy Nasdaq was roiled by DeepSeek. “News” that the Chinese disruptor can compete with some of the biggest US tech players at lower cost, conveniently timed to land shortly after the 20 January presidential inauguration, has nonetheless raised legitimate questions over valuations.

In Europe the incoming Merz government in Germany is seeking to ease long-standing rules against borrowing to fund increased military spending. The European Union, previously constrained by Germany, can increasingly borrow on its own account.

Japan meanwhile has re-entered the world economy as a more normal actor. Inflation, interest rates and the notion of return on Japanese sovereign debt have returned after decades of anxiety over deflation, borrowing and negative real rates.

More positively, there are signs that Trump is forcing India to reduce tariffs – a departure given New Delhi’s historic fondness for protectionism and reluctance to ease barriers to investment and trade.

There is then much for investors to contend with. And we are less than two months into the new US administration.

As my colleague Matt Smith has found in research for this email, this has had an effect on Gulf stock exchanges. Admittedly foreign interest in the seven markets is limited but many have endured a rough start to March, continuing a trend from the end of last month.

Dubai’s index is down 5 percent since hitting a 17-year high on February 20.

Saudi Arabia’s Tasi has fallen 6 percent in the past month. Qatar, Oman and Abu Dhabi have also slid over the same period. The only regional gainers are Kuwait, which is up almost 1 percent, and thinly traded Bahrain.

Shares in Saudi Aramco, the world’s largest listed oil major and by far the biggest publicly traded Gulf company, have fallen to a five-year low, declining to levels not touched since the early days of the Covid-19 pandemic.

The culprit is flabby oil prices. Brent crude has slipped to below $70 per barrel and is down nearly 7 percent so far in 2025.

Lower oil prices mean lower government revenues across the Gulf, which in turn is likely to limit economic growth and, with it, profits among the region’s listed companies – not only those in the energy sector – and so are a prime cause of deepening stock market gloom.

Primary markets are more buoyant, as Megha Merani has found. Much more so. In Abu Dhabi, shares in Alpha Data, an IT provider, surged on the company’s debut this week. The company raised AED600 million ($163 million) in an IPO that sold 40 percent of its stock.

In Oman, Asyad Shipping offered a fifth of its shares on the Muscat stock exchange, raising $333 million, albeit from a local sovereign wealth fund and a Qatari institution.

And in Riyadh, Derayah Financial, a digital broker, raised SAR 1.5 billion ($400 million) in floating 20 percent of its shares.

The chairman of the Tadawul board said earlier this month that the Capital Markets Authority has a backlog of between 50 and 55 applications for IPOs.

In the meantime we await President Trump’s first overseas visit. Trump said at the weekend that he would probably travel to Saudi Arabia “in the next month and a half”. Perhaps he will time his arrival to bolster Ukraine-Russia peace talks underway in the kingdom – but he likes to be a winner and that may not be possible.

The president has also said that Saudi Arabia will invest up to $1 trillion in the US economy in part in the form of weapons orders. Will it? Can it? Look at the oil price. The kingdom has reason to feel nervous.