Stock markets across the Gulf rose sharply on Wednesday, as a dramatic de-escalation in the US-Israeli war on Iran and the growing prospect of a permanent peace deal buoyed investor sentiment.
The rally follows the US and Israel agreeing to halt strikes for two weeks, with Tehran in turn saying it would allow vessels to pass through the Strait of Hormuz “via co-ordination with Iran's armed forces”. The move has eased fears that the global energy crisis would worsen.
In the UAE, Dubai’s equities benchmark, the DFM General Index, surged more than 8 per cent during early trade and was up 6.8 per cent at 10.40am, supported by an 11.3 per cent rise in shares of Emaar Properties, the emirate's biggest developer.
Dubai’s leading lender Emirates NBD also surged 13.8 per cent, while Dubai Islamic bank, the biggest Sharia-compliant bank in the Emirates, added 7.3 per cent.
Abu Dhabi’s main stocks index, which advanced as much as 4.6 per cent in early trade, was up 3.17 per cent. A 10 per cent surge in Aldar Properties helped the Abu Dhabi Securities Exchange gain. Banking stocks in the UAE capital also rallied, with First Abu Dhabi Bank adding 10.5 per cent, while Abu Dhabi Commercial Bank and Abu Dhabi Islamic bank advanced 7.4 per cent and 9 per cent, respectively.
Two-week pause
The equities rallied after US President Donald Trump said in a post on Truth Social that he agreed to “suspend the bombing and attack of Iran for a period of two weeks”, after talks with Pakistan. He said the deal was subject to Tehran immediately allowing safe passage through the strait.
“We received a 10-point proposal from Iran and believe it is a workable basis on which to negotiate,” Mr Trump added.
Iran has claimed victory and its Foreign Minister Abbas Araghchi said that, if attacks against the country are halted, “for a period of two weeks, safe passage through the Strait of Hormuz will be possible via co-ordination with Iran’s armed forces”. Iran will cease its “defensive operations” for the next two weeks, he said in a statement.
Israel has said it supports the US decision to cease hostilities during the two-week period. But Prime Minister Benjamin Netanyahu said the ceasefire did not include Lebanon, where Israeli forces are fighting against Hezbollah.
The pause in the war, announced shortly before Mr Trump's deadline for Tehran to strike a deal, will allow negotiations to take place in Islamabad for a permanent diplomatic solution. The US President had warned that American and Israeli forces would attack Iranian energy and civilian infrastructure if there was no agreement.
“It took a while to arrive, coming just before midnight here in London, but yesterday did eventually bring about yet another ‘TACO [Trump Always Chickens Out] Moment’”, Michael Brown, senior research strategist at Pepperstone, said.
“This time does look different, though, with the President noting that the two-week period is a ‘double-sided ceasefire’, during which the Strait of Hormuz will be reopened by the Iranians, a pivotal step in the normalisation of global commodity flows.”
The conflict caused a global energy crisis, disrupted global supply chains and affected businesses across continents. In the Gulf, property, travel and tourism, as well as hospitality, are among the worst affected sectors of the economy. The IMF and World Bank had warned of serious consequences for global economic growth if the war dragged on.
Relief rally
Elsewhere in the region, Qatar’s benchmark QE Index rallied 3.8 per cent, supported by a sharp rise in banking, transportation and real estate stocks.
The main equities gauge in Kuwait also added 2 per cent, with Gulf Finance House and National Bank of Kuwait adding 4.7 per cent and 3.7 per cent, respectively.
Shares in Oman advanced 0.55 per cent while in Bahrain, the main gauge added 0.47 per cent.
Saudi Arabia’s Tadawul index also followed the regional trend, rising 1.58 per cent, supported by a 2.11 per cent gain in the kingdom's biggest lender Saudi National Bank shares. Oil giant Saudi Aramco however, slipped 2.98 per cent.
The relief rally in the Gulf follows a sharp rise in equity markets in Asia, the region most affected by the disruption in oil and gas flows from the Middle East.
The MSCI Asia Pacific Index rose as much as 5.1 per cent, Japan's Nikkei 225 Index surged 4.6 per cent, Australia's S&P ASX Index added 2.59 per cent, Hong Kong's Hang Seng rose 3.1 per cent while the Shanghai Composite Index gained 2.5 per cent.
US equities futures also rallied, with the S&P 500 futures rising 2.26 per cent and Nasdaq 100 futures up 2.92 per cent.
