By Sarah Mitchell, The Appleton Times
DUBAI, United Arab Emirates — As the war involving Iran stretches into its second month, financial markets across the Gulf region are fracturing along unexpected lines, with some indices soaring while others plummet amid volatile energy prices and escalating geopolitical tensions. The conflict, which erupted on February 28, 2026, has sent shockwaves through the region's economies, particularly as the Strait of Hormuz — a vital chokepoint for global oil shipments — has become a focal point of hostilities. Investors are navigating wild swings, with safe-haven assets gaining traction in certain corners while real estate-sensitive markets reel from the uncertainty.
Since March 1, the day after the war's onset, Oman's stock index has surged 9.3 percent, outpacing its neighbors and drawing inflows from risk-averse investors. Saudi Arabia's Tadawul All Share Index has also climbed, advancing 5.8 percent over the same period, buoyed by a sharp rally in oil prices that has favored the kingdom's energy-dominated economy. In stark contrast, Dubai's DFM General Index has tumbled nearly 16 percent, Qatar's benchmark has slipped 4 percent, and Bahrain's BAX index has fallen 7.2 percent, according to data compiled by market analysts.
The divergence underscores the uneven impact of the conflict on Gulf economies, each with varying exposures to oil, real estate, and broader regional stability. Damanick Dantes, founder of Dantes Outlook, a Dubai-based investment advisory firm, attributed Saudi Arabia's resilience to its close ties with global energy markets. "Saudi's index, which is closely correlated to energy markets, has been turbo-charged by the spike in oil prices," Dantes told CNBC's "Access Middle East" program on Thursday.
Oil benchmarks have indeed skyrocketed since the war began, with Brent crude hovering around $100 a barrel for the past week and trading at $110 per barrel on Friday afternoon in New York. U.S. West Texas Intermediate futures for May delivery stood firmly above $95, reflecting fears of supply disruptions through the Strait of Hormuz, through which about 20 percent of the world's oil passes daily. For Saudi Arabia, this price surge has been a boon, particularly for giants like Saudi Aramco, which can bypass the strait via pipelines to the Mediterranean Sea, ensuring continued exports even as naval tensions rise.
"I think [oil] hovering above $80 a barrel is a net positive for Saudi and other energy companies within the region," Dantes added in the interview. He noted that a small number of large energy firms dominate the Saudi market, insulating it somewhat from the broader turmoil. This alternative routing capability has allowed Riyadh to maintain production levels, with Aramco reportedly ramping up output to capitalize on the elevated prices, according to industry trackers.
Oman's gains, meanwhile, stem from its reputation as a regional safe haven, amplified by ongoing economic diversification efforts. The sultanate's Vision 2040 plan, launched years ago to lessen oil dependency through investments in tourism, logistics, and non-hydrocarbon sectors, has attracted capital flight from more exposed markets. Dantes highlighted this appeal, saying investors are flocking to Omani assets amid the upheaval, viewing them as more stable in a time of crisis.
On the flip side, the United Arab Emirates, particularly Dubai, has borne the brunt of the downturn due to its sensitivity to real estate fluctuations and direct exposure to geopolitical risks. The emirate's property sector, a cornerstone of its economy, has seen sharp declines in transaction volumes since the war started, exacerbating the stock market slide. Dantes pointed out that broader events, including sporadic skirmishes near UAE borders, have rattled confidence in the area.
Despite the weekly losses, Dubai's index showed flickers of recovery this week, edging up 4.2 percent on Wednesday — its largest single-day gain since December 2024 — driven by rebounds in real estate and banking stocks. It closed the week 2.4 percent higher, offering a glimmer of optimism amid the gloom. Still, analysts caution that such bounces may be fleeting in the current environment.
Dantes urged caution for investors eyeing the region, emphasizing the need for a defensive posture. "This is not the time to take excessive risk in your portfolio," he said. "What we're focusing on are quality assets that have more resiliency to outperform in a down-to-uncertain market environment." He suggested opportunities in Saudi Arabia's pre-IPO market, where investor appetite remains robust despite vulnerabilities, as companies push forward with public listings.
"You don't want to be too defensive because anything can happen," Dantes continued. "You can have a resolution that would spring a huge rebound." This balanced view reflects the precarious tightrope investors are walking, balancing the potential for de-escalation against the risk of further escalation, such as attacks on critical infrastructure.
Fahd Iqbal, head of investment services at Union Bancaire Privée (UBP) in Dubai, echoed the call for prudence during his appearance on the same CNBC program. Signs of de-escalation, he said, would lift investor sentiment, but a full resolution could drag on longer than expected. "Hostilities must not cross critical 'red lines,' involving attacks on energy infrastructure and water desalination," Iqbal warned, noting that such moves would signal a dangerous escalation with ripple effects across the Gulf.
Iqbal also flagged macroeconomic pressures weighing on the region, including the dollar peg that ties Gulf currencies to the U.S. dollar, heightening inflation risks as American interest rates climb. Traditional safe havens like gold have behaved more like risk assets lately, influenced by a strengthening dollar and rate hike expectations, he observed. "There are definitely investors that are seeking to take advantage of price dislocations," Iqbal said of the market swings. "But we don't advise, and neither are our clients seeking, to take aggressive or very strong positions at this stage. We're broadly speaking remaining quite cautious until we get better visibility on it."
The war's origins trace back to escalating proxy conflicts and direct confrontations between Iran and its adversaries, including Israel and Gulf states, though details remain fluid with both sides accusing the other of provocations. The Strait of Hormuz has seen increased military patrols from multiple nations, including the U.S. Navy, which has deployed additional assets to secure shipping lanes. Reports from the International Energy Agency indicate that global oil supplies are holding steady for now, but any blockade could spike prices further, potentially to $150 a barrel or more.
Broader implications extend beyond the Gulf, as the conflict threatens to disrupt global trade routes and inflate energy costs worldwide. European and Asian markets have felt the pinch, with refiners scrambling for alternative supplies from the Americas and Russia. In the U.S., gasoline prices have risen about 20 cents per gallon since late February, according to the Energy Information Administration, adding pressure on consumers and policymakers alike.
Looking ahead, the path to stability hinges on diplomatic breakthroughs, though talks mediated by Oman and Qatar have yielded little progress so far. Investors like those at UBP and Dantes Outlook are bracing for prolonged volatility, advising diversification into resilient sectors such as technology and renewables within the Gulf. As Dantes put it, the key is positioning for both downside protection and upside potential in a region where fortunes can shift overnight. For now, the splintered markets serve as a barometer of the war's deepening fault lines, with Saudi Arabia and Oman emerging as relative winners while others grapple with the fallout.