Gulf Stock Markets Fall Broadly as Oil Prices Drop and Fed Rate Hike Expectations Rise
Claire Weston
Major Gulf stock markets fell Tuesday as an Iran sanctions waiver pushed oil down over 3%, while the probability of at least two Fed rate hikes this year jumped from 15.2% to 54% in one week — a double blow to dollar-pegged Gulf economies.
Why did oil prices suddenly drop?
The U.S. announced a 60-day waiver on Iran oil sanctions Monday, as part of a Middle East ceasefire deal.
Oil fell over 3% on the day; Brent crude slid another $1.09 Tuesday to $76.81 a barrel.
This means → Iranian oil may re-enter the market, and the expected supply increase is pushing prices down directly.
VP JD Vance said U.S.-Iran talks are progressing and the Strait of Hormuz remains open. In plain terms = the risk of a Middle East supply disruption is falling, and oil has lost a key price support.
Why did Fed rate-hike expectations jump so fast?
Per the CME FedWatch tool, fed-funds futures now price at least two hikes this year (25 bps each) at 54% probability — up from just 15.2% a week ago.
Markets attribute the shift to a more aggressive anti-inflation stance under new Fed Chair Kevin Warsh.
This means → the jump is not about economic data suddenly worsening — it is markets repricing the belief that the new chair will be more hawkish than his predecessor.
Why do these two things hit Gulf markets together?
Gulf economies share two features: revenue depends on oil sales, and currencies are pegged to the dollar.
Falling oil cuts expected fiscal revenue; a Fed hike means Gulf central banks will likely follow — in plain terms = borrowing gets more expensive, squeezing corporate and bank margins from both sides at once.
This reflects the Gulf's acute sensitivity to external variables: a move in either oil or U.S. rates transmits directly, and both moving at once is a double shock.
How far did each market fall — and who got hit hardest?
Dubai's main index dropped 1.1%, the steepest decline; Emirates NBD, the emirate's largest bank, fell 2.7%.
Abu Dhabi's index fell 0.5%. Saudi Arabia's TASI slipped 0.2%, with Al Rajhi Bank down 0.3%.
Qatar's index edged down 0.1%; Qatar Islamic Bank fell 0.2%.
This means → banks took the biggest hit — rate-hike expectations push up funding costs, and bank stocks price that in fastest.
What to watch next?
Two key variables: whether oil can stabilize after Iranian supply returns, and whether the Fed's rate-hike path accelerates further.
If oil keeps sliding and hike expectations keep climbing, the dual pressure on Gulf equities will not ease in the near term.
Put simply = two ropes — oil price and interest rates — are tightening at the same time. Markets only get room to breathe when at least one loosens.
Content is for reference only, not financial advice.