Middle East markets dip as Israel and Iran continue to trade blows

Slide in Arab bourses follow global equities rout after Israel's attacks on Iran began on Friday

Damaged cars lie by the ruins of a building in the northern Israeli town of Tamra. AFP

Live updates: Follow the latest on Israel-Iran conflict

Middle East markets dipped on Sunday as Israel and Iran continued attacks on defence and energy centres, with no signs of let-up from either side.

The Saudi Tadawul All Share Index (TASI) closed 1.01 per cent down after dipping more in early trade.

The Qatar Stock Exchange closed down 3.2 per cent while Kuwait's main market settled 3.37 per cent lower. Both slumped more than 4 per cent during early trading on Sunday.

The Muscat Stock Exchange rallied slightly to end the day down 0.87 per cent, while Bahrain's bourse settled 0.81 per cent lower.

Egypt's EGX 30 Index also closed 4.65 per cent lower after paring earlier losses.

"It is no surprise that with an open-ended Israel-Iran shooting war underway that regional markets have been pounded too, as far as Egypt, which has seen gas supplies from Israel cut off," Hasnain Malik, head of emerging and frontier market investment strategy at Tellimer, told The National.

"Eastern European markets, however, provide an example of how quickly regional markets can recover if there are indications that the conflict will not spill-over."

In the absence of a widening of the scope of the current conflict, the immediate risks to GCC countries should remain contained, Goldman Sachs said in a report.

But it highlighted the Gulf's geographic proximity to the conflict and “the potential for disruption to regional tourism, as well as oil production and supply routes”, if the conflict expands.

Stocks in Tel Aviv also opened lower on Sunday in the first trading session since the start of waves of air, drones and missile strikes between Israel and Iran on Friday.

However, markets reversed earlier losses, with the Tel Aviv 35 index up 0.82 per cent and the broader TA-125 index 0.75 per cent higher.

Both Israel and Iran expanded their attacks overnight with tension escalating as the conflict enters the third day. It started when Israel launched, what it called a “pre-emptive” strike early on Friday, hitting nuclear and military sites inside Iran.

In Iran, the Shahran fuel depot was hit during an Israeli attack that began on Saturday night, setting storage tanks on fire, Iran’s Oil Ministry said. In the city’s south, Shahr Rey, one of the country’s largest oil refineries, was also struck, according to Iranian state media.

Israel and Iran exchange fire through night with explosions heard in Jerusalem and Tel Aviv

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Israel's emergency services said at least eight people, including children, were killed in the overnight strikes, and about 200 were wounded.

Stock markets around the world plunged on Friday because of rising tension.

The Dow Jones Industrial Averaged tumbled 1.79 per cent. The S&P 500 and tech-heavy Nasdaq Composite fell 1.13 and 1.3 per cent, respectively, at the market closed on Friday.

Japan's Nikkei 225 lost 0.89 per cent, South Korea's Kospi dropped 0.87 per cent and Hong Kong's Hang Seng index shed 0.59 per cent.

In London, the FTSE 100 was down 0.39 per cent, while Paris’s CAC 40 fell 1.04 per cent and Frankfurt's DAX shed 1.07 cent.

In the Middle East, Dubai’s DFM general index closed 1.85 per cent lower, while Abu Dhabi’s FTSE ADX general index was down 1.47 per cent. Both markets are closed for trading on Sunday.

Stock markets are already under pressure due to the tariff-driven disruption and the intensifying Israel-Iran conflict is adding another layer of volatility to an fragile state.

“Global markets are grappling with the dual challenge of energy supply risk and policy uncertainty,” Iridium said in a note to investors on Sunday.

“Oil prices have surged, raising inflation concerns and prompting some tanker operators to reroute shipments.”