Gulf Stock Markets Decline Amid Weaker Oil Prices and U.S. Inflation Concerns

Gulf stock markets closed mostly lower on Wednesday, driven by weaker oil prices and investor caution ahead of key U.S. inflation data. The data, expected to influence a potential interest rate cut from the Federal Reserve, kept traders on edge.

Oil Prices Pressure Gulf Markets

Oil prices have been a critical factor influencing Gulf markets. On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand growth in 2024, citing data collected throughout the year. This marks OPEC’s second consecutive downward revision.

OPEC specifically pointed to China, where growth is expected to slow due to economic challenges and a shift towards cleaner energy. The group reduced its forecast for Chinese oil demand in 2024 from 700,000 barrels per day (bpd) to 650,000 bpd. Oil prices, which dropped more than 3% on Tuesday, remain near three-year lows after the OPEC+ group also revised down its demand forecast for both this year and 2025.

Saudi Stock Market Hit by Oil Decline

Saudi Arabia’s benchmark index (.TASI) fell by 1.8%, impacted by a 1.7% decline in Al Taiseer Group and a significant 5.1% drop in ACWA Power Co. Additionally, oil giant Saudi Aramco experienced a 0.7% decline. The downward pressure on the Saudi market was largely driven by weaker oil prices, which continue to hover at multi-year lows.

U.S. Inflation Data Adds to Market Uncertainty

Investors are closely watching U.S. inflation data, which came out after market hours on Wednesday. The U.S. Consumer Price Index (CPI) rose slightly in August, though underlying inflation remained persistent. This development could influence the Federal Reserve’s decision on whether to implement a half-point interest rate cut next week.

Although inflation is still above the Federal Reserve’s 2% target, it has slowed considerably. However, the “stickiness” of underlying inflation may prevent the central bank from taking more aggressive measures to lower interest rates.

Broader Gulf Markets Also Under Pressure

Dubai’s main share index (.DFMGI) dropped 0.9%, with Emirates NBD retreating by 2.7%. In Abu Dhabi, the index (.FTFADGI) also saw a 0.9% decline. Meanwhile, Qatar’s benchmark index (.QSI) finished 0.2% lower, primarily due to a 2.3% drop in Qatar Gas Transport (QGTS.QA).

The overall downturn in Gulf markets reflects broader concerns about weaker oil prices and inflationary pressures that may affect global economic growth in the coming months.

Conclusion

As oil prices continue to decline and investors brace for key U.S. inflation data, Gulf stock markets are facing increased pressure. OPEC’s revised oil demand forecasts, particularly for China, signal potential long-term headwinds for the region’s oil-dependent economies.