Stock markets in the petrodollar-dependent Arabian Gulf tumbled Sunday to multimonth lows, spooked by sharply lower oil prices and a global equities selloff over the regional weekend on growing concerns about China’s economy.
U.S. stocks Friday endured their worst losses in four years after new Chinese data raised more questions about the health of the world’s second-biggest economy, and whether this would impact global growth. And a potential slowdown in Chinese demand for commodities dragged oil prices lower amid increasing consensus that cheap crude is here to stay.
For the Gulf nations, which largely depend on energy exports to finance their expansionary spending plans at home, the weak outlook for oil further aggravated a recent sell down of risk in the region.
“The double-dip in oil prices [after last year’s fall] has made investors worried about the growth prospects for the [Gulf Cooperation Council], particularly since oil prices are once again below the budget break-even for many countries,” said Simon Kitchen, the head of MENA strategies at investment bank EFG Hermès.
Dubai stocks fell the most Sunday, losing 7% to end at 3451.48, while its neighbor in the United Arab Emirates, Abu Dhabi’s market, dropped 5% to 4286.49. Qatar’s main stocks benchmark finished down 5.3% at 10,750. The Gulf stock markets are open for trading Sunday through Thursday.
Investors in the region took a lead from Saudi Arabia, the Middle East’s biggest economy. Its stocks were trading 4.9% lower at 7625.12, despite paring some early-session losses, after Fitch Ratings on Friday downgraded its outlook for the kingdom to negative from stable because of weaker oil prices.
The Saudi economy is heavily dependent on oil, which accounts for 90% of fiscal revenues, 80% of current account revenues and 40% of the gross domestic product, analysts at Fitch noted.