Gulf markets trade up despite US strikes on Iran
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The news: Most stock markets across the Middle East were trading higher on Sunday, seemingly unfazed by rising tensions across the Gulf after the US launched strikes on Iranian nuclear sites.
The numbers: Israel’s TA-35 benchmark index advanced 1.5%, posting gains for the sixth day running and on track for the biggest quarterly advance since 2003. Egypt’s equity benchmark posted a 2.7% jump.
Other markets recorded more modest gains, with Kuwait’s Boursa Kuwait Premier Market Index and MSX30 in Muscat rising 0.4%. Qatar’s benchmark rose 0.2% while Saudi Arabia’s Tadawul All Share Index fell 0.3%.
The context: “The market is displaying cautious optimism against the backdrop of the security reality,” Yaniv Pagot, vice president of trading at Tel Aviv Stock Exchange, said in a note, Bloomberg reported. “The increases reflect an improvement in the risk premium of the State of Israel.”
Oil prices are expected to surge when trading resumes after the weekend. Global oil markets were closed over the weekend, but reopen at 8:00am Monday AEDT.
The FT reports that oil prices have already climbed around 10% since Israel launched a surprise attack on Iran 10 days ago, but prices are yet to breach USD80 a barrel, largely because oil supply from the region has not been affected. Brent crude hit an intraday high of USD79 a barrel on Thursday, the highest since January, before closing at USD77 on Friday.
Iran has reportedly not ruled out attacks on US naval ships in the Strait of Hormuz, where around one third of the globe’s seaborne oil supplies transit every day, nor has it said that it will not close off access to the waterway. Any increase in conflict in the Strait will likely cause oil prices to soar.
Ahead of the US strikes on Iran, analysts from Barclays said in a note that Brent crude oil prices, "the main risk channel for the global economy" could rise above USD100 per barrel if there was an escalation in the conflict. "In our estimates, a reduction in Iranian oil exports (not seen yet) could push Brent above $80/b, while a worst-case scenario of a wider conflagration, including a closure of the strait of Hormuz, could push prices past $100/b" they wrote.
