GCC Stock Markets Plummet Amid Possible Strikes on Syria

With turmoil in Syria quickly escalating in recent days, the stocks markets in GCC countries have seen a sharp and sudden downturn.

al-monitor Men sit in the main hall of the stock exchange at Kuwait Bourse, Dec. 3, 2012. Photo by REUTERS/Jamal Saidi.

Topics covered

us, syria, market, gulf, gcc, finance

Aug 28, 2013

The stock markets of Gulf Cooperation Council (GCC) countries witnessed a collective decline on Aug. 27, punctuated by a state of panic that swept over investors. This came amid increasing political uncertainty in the region and the possibility of a Western military strike on Syria, after the Syrian government was held responsible for the chemical weapons attack that killed more than a thousand people on Aug. 21.

Trading screens in the region’s markets were displayed in red, indicating lower stock prices on the Dubai Financial Market, which experienced the largest drop — ranging from 8% to 10%. The Dubai Financial Market General Index (DFMGI) subsequently ended down by 7.1%, and the Abu Dhabi Stock Exchange declined by 2.8%. The Saudi Stock Exchange lost more than 3.8% of its value, the Kuwaiti Stock Exchange fell by 3% and Oman Stock Exchange by 1%.

Speaking to Al-Hayat, financial experts and analysts noted the state of panic that exists among investors in the markets of the region, following escalated talks about a potential military strike on the Syrian regime, as well as expected market corrections in light of the sharp increases in the Gulf stock markets last month, which pushed the Dubai Financial Market to climb the most, by more than 60%.

Abdullah al-Hosani, general manager of Emirates NBD Securities, said that foreigners sold stocks on the grounds that they “do not differentiate between one country and another in the region, and think that what is taking place in one country applies to the rest.” He noted that local portfolios “did not push toward selling, although some have eased the purchase or shifted their investment to take advantage of the market rises in the past few months.”

The experts pointed out that foreign investors’ fears have doubled, in light of media reports noting an increased likelihood that the repercussions of the Syrian war might reach Lebanon, and the likelihood that Iran could involve itself in the equation as a supporter of Syria, especially with the increasing threats made by Iranian officials.

The experts said that the decline is expected to continue in the region’s financial markets, in light of the uncertainty that prevails over the political situation. Yet they will sharply rise once the region’s political situation calms down.

Some analysts recalled what previously happened in the GCC stock markets in general, and particularly in the UAE, when the markets recovered following the Gulf wars and Arab Spring uprisings, after most of the investments left countries experiencing political unrest to the GCC countries, considering them to be a safe haven in times of crisis.

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