Stock markets in Abu Dhabi and Dubai recorded their highest close in three months amid optimism generated by a US-Iran peace deal that has eased tensions across the Middle East.
On Wednesday, the Abu Dhabi Securities Exchange's main index closed 0.3 per cent higher at 9,996.20 points, while the Dubai Financial Market ended the day 1 per cent up at 6,115.97 points. Both bourses had their previous highs on March 11 and March 5, respectively.
"The significant decline in tensions, the announcement of an interim agreement between the US and Iran and the hopes of further progress in the following negotiations are fuelling optimism and risk appetite among investors," said Roxane El Mawla, group chief executive at trading platform Uexo.com.
US President Donald Trump on Sunday announced an agreement with Iran and said the Strait of Hormuz – through which about a fifth of the world's oil and gas supplies normally flows – would reopen.
If fully implemented, the agreement would bring an end to a conflict the US launched alongside Israel on February 28. The conflict has disrupted trade and roiled global oil markets, with crude prices rising to nearly $120 per barrel in March.
The UAE faced the highest number of missile and drone attacks from Iran, as Tehran struck its neighbours. But despite the disruption, the UAE's economy is this year expected to grow, albeit at a slower rate, the International Monetary Fund said.
"While the strong local economy is providing a floor to the stock market, the positive geopolitical developments could help remove the disruptions that affected several sectors and industries, including energy, aviation and tourism, and boost performance," Ms El Mawla said. "As such, the real estate sector has seen a strong rebound and could remain positioned for more increases as demand from local and foreign investors for assets in the country improves."
Aldar Properties, Abu Dhabi's biggest listed developer, ended the day soaring 4.6 per cent higher while Emaar Properties' stock price jumped 3 per cent on the Dubai Financial Market. Other best performing stocks include Air Arabia, Emirates NBD, Gulf Navigation, NMDC and Abu Dhabi Commercial Bank.
There was also notable positive performances from the shares of smaller companies including Al Firdous Holding, which leapt nearly 15 per cent, and Manazel, which increased more than 4.5 per cent.
"We expect further strong performance from UAE stocks, which could surpass similar markets in the region due to the diversity of the UAE economy and the revival of the tourism sector, especially during the summer season, in addition to government support and a favourable regulatory environment," said Samer Hasn, a senior market analyst at XS.com.
This month, Moody's Ratings has maintained the UAE's high credit rating, saying the nation's robust financial position and diversified economy have helped it create “strong shock-absorption” capabilities against the continuing regional unrest. The Emirates' long-term local and foreign currency issuer ratings was affirmed at Aa2 with a stable outlook.
While the ADX and DFM have been at their strongest levels in recent months, both exchanges still have ground to recover before returning to their pre-conflict highs, said Nagham Hassan, a market analyst at trading platform eToro.
She said two "critical" factors would determine if the stock market momentum will be sustained – the expected signing of the peace deal in Geneva on Friday and interest rate signals from Kevin Warsh, the new Federal Reserve chief chosen by Mr Trump.
Those will determine "whether this recovery has the foundations to extend through the third quarter", Ms Hassan said. The momentum "has directly lifted real estate and banking names ... as for the sustainability of this rally, the trajectory looks constructive but remains conditional", she added.
