Markets in freefall: Gulf bourses hit hard by US tariffs

06/04/2025 23:59 AST

Gulf bourses experienced a downturn on Sunday as fresh US tariffs dampened investor confidence across the region, leading to widespread sell-offs in line with last week's global market slump.

Saudi Arabia's benchmark Tadawul All Share Index experienced a significant drop of 6.78 percent during today's trading session, losing 805.46 points to close at 11,077.19. This marks its steepest single-day decline in months. The total trading volume for the index reached SR8.43 billion ($2.24 billion), with only one stock advancing and 252 retreating.

The MSCI Tadawul Index also saw a decline, falling by 98.60 points, or 6.56 percent to settle at 1,405.55.

Meanwhile, the Kingdom's parallel market, Nomu, dropped by 1,992.71 points, or 6.5 percent, closing at 28,648.22. Notably, 89 listed stocks advanced in Nomu, while 11 retreated.

The worst performer of the day on the main market was Methanol Chemicals Co., whose share price fell by 10 percent to SR12.06, while the only positive performer stock was Nama Chemicals Co. with its share price surging by 0.5 percent to SR30.45.

In an interview with Arab News, Gaby Tchennozian, chief investment officer at a Dubai-based family office, highlighted that global market turbulence - triggered by an escalating US-led trade war-has not spared the Gulf region.

"Even though the region isn't directly involved in the trade tensions, the spillover is already being felt in markets," he said.

Qatar's QE Index declined by 4.23 percent, while Kuwait's Premier Market Index dropped 5.69 percent. Other regional markets were similarly affected, with Muscat's MSX 30 Index falling by 2.62 percent and the Bahrain All Share Index down by 1 percent. Investors are closely monitoring the impact of escalating trade tensions and the recent decline in oil prices.

This followed the announcement by US President Donald Trump of a 10 percent reciprocal tariff on Gulf imports.

Although UAE markets were closed on Sunday, the Abu Dhabi Securities Exchange ended the previous week with a 1.9 percent loss on Friday. Similarly, Dubai's DFM General Index closed 1.5 percent lower on April 4, indicating that further declines could occur when trading resumes on Monday.

"For investors, the lesson isn't just about reacting to headlines. It's about building portfolios that can weather unexpected shocks," Tchennozian noted.

In Egypt, trading was temporarily halted in several stocks on Sunday for 10 minutes after having dropped by 5 and 10 percent, in line with market regulations designed to prevent excessive volatility.

Tchennozian anticipates that market turbulence will persist for the next 2-3 months due to continued uncertainty.

While OPEC's production increase was overshadowed by news of US tariffs, oil prices remain near GCC break-even levels. However, they could decline further if global trade weakens.

Potential rate cuts by the Federal Reserve may provide some relief, but tensions in the Red Sea are dampening market sentiment.

Tchennozian cautioned that if trade wars escalate or regional conflicts intensify, this volatility could extend well into late 2025.

Tariff turmoil rattles markets
The White House confirmed on April 2 that a 10 percent tariff on Gulf Cooperation Council imports, effective April 5, was imposed to address what President Trump described as "long-standing unfair trade practices."

Although the Gulf states were spared from more severe penalties-41 percent for Syria and 39 percent for Iraq-the move has raised concerns about rising import costs for US-sourced goods, particularly in sectors like construction and electronics.

"These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated," the White House said in a statement on April 2.

Banking sector hit hardest
Gulf banking stocks were hit hardest amid growing fears of a potential US economic slowdown. The sell-off mirrored the steep losses seen on Wall Street on April 4, where the S&P 500 plummeted 9.58 percent, wiping out $5 trillion in market value and marking one of its worst declines in 70 years, according to Reuters.

The Nasdaq Composite Index also dropped by 5.8 percent on Friday, losing 962.8 points and officially entering bear market territory, driven by mounting global economic concerns.

Oil prices add to the pressure
Although the White House confirmed that oil and gas imports would be exempt from the new tariffs, Saudi oil giant Aramco still experienced a dip in market value during Sunday's trading session. Its shares fell by 5.25 percent on Sunday to reach SR24.92, leading to a decrease of SR333.9 billion in market capitalization to settle at SR6.03 trillion.

For the GCC, the White House's exemption is significant, as oil and gas constitute over 60 percent of Saudi Arabia's exports to the US and remain a vital part of Gulf-US trade relations.

Oil prices plunged 7 percent on Friday, hitting a three-year low, after China retaliated in the escalating trade war by imposing 34 percent tariffs on all American goods, effective April 10.

This move, coinciding with global preparations for countermeasures against Trump's tariffs-the highest in over a century-sent shockwaves through markets, with investors increasingly factoring in recession risks.

JP Morgan raised its forecast for a US and global recession to 60 percent, up from 40 percent, warning that escalating tariff tensions are undermining business confidence and threatening to derail global growth.

S&P Global also adjusted its "subjective" odds of a US recession, raising them to 30-35 percent, up from 25 percent in March.

Goldman Sachs had already revised its US recession risk to 35 percent from 20 percent ahead of the April 2 tariff announcement, citing weakening economic fundamentals.

HSBC noted on Thursday that the recession narrative is likely to strengthen, although markets have already factored in some of the risks.

Tchennozian further emphasized that Gulf markets are bearing the pressure as global indices continue to slump due to the ongoing US-led trade war. "GCC governments must act swiftly and decisively to reassure investors and safeguard their economies," he said.

He suggested that this could be achieved by ramping up infrastructure spending while central banks ensure liquidity, particularly for small and medium enterprises.

Additionally, sovereign funds may need to step in with market stabilization measures, alongside diversifying trade toward Asia and Africa to mitigate the impact.

"Above all, clear and consistent communication from policymakers is key to reassuring investors that the region is not just weathering the storm-but actively steering through it," he concluded.