WSJ: Gulf Markets Reel on Greece Crisis and Islamic State Attack
DUBAI—Stock markets in the Persian Gulf, already jittery about security in the region after an Islamic State suicide bombing in Kuwait, fell Monday on concerns that the escalating Greek crisis could weigh on oil prices.
Appetite for risk tumbled across global markets after Greece shut down its banking system and imposed capital controls, part of a wider emergency response over the past few days that has pushed the country dangerously close to leaving the eurozone.
The Gulf economies—most of which have hefty foreign reserves and peg their currencies to the U.S. dollar—are largely insulated from the eurozone crisis. But weaker oil prices will link the Greek crisis to the region’s markets, noted Simon Kitchen, head of MENA strategies at investment bank EFG Hermès.
“Europe’s recovery must be in question, while private sector uncertainty is high and European governments are still advocating austerity. GCC equity markets will be sensitive to oil-price moves for as long as oil is trading close to budget break-evens for many countries,” Mr. Kitchen said.
Saudi Arabia’s market, the region’s biggest, finished 1.6% lower at 9059.94, led by petrochemical firms. Dubai stocks closed down 0.3% at 4042.03, its neighbor Abu Dhabi’s market shed 0.8% to 4679.96 and Qatar’s main stocks index slipped 0.6% to 12,013.53.
The Gulf countries largely depend on revenue from oil sales to finance their expansionary budgets. Crude prices slumped on Monday amid a global selloff in riskier assets.
The region’s equity markets had closed lower on Sunday as well, spooked by concerns of more militant attacks in the region after an Islamic State suicide bomber killed and injured scores of people in Kuwait.
The Greek crisis has only added to the uncertainty in the Gulf markets, already suffering from relatively lower volumes, which is usual during the summer months and the holy month of Ramadan that ends this year around mid-July.
“Keep in mind that most regional markets have been in neutral-to-weak mode to begin with, which makes the case for a relatively sizable selloff [5% to 10%] over the coming days fairly strong,” said Adel Merheb, the director of equity capital markets at Shuaa Capital. “This is clearly unfortunate but with the way things are looking with Greece, it looks inevitable,” he added.
