Kuwaiti and Saudi stocks led Gulf stocks sharply lower in late afternoon trade on Sunday in the wake of a U.S. drone strike in Baghdad that killed the commander of an Iranian elite military unit.
Shares of oil giant Saudi Aramco fell 1.7 per cent to their lowest level since listing last month in a record IPO.
Aramco dropped to 34.55 riyals ($12) a share, the lowest level since it started trading last month.
Major-General Qassem Soleimani, the architect of Tehran’s overseas military operations, was killed on Friday in a U.S. drone strike on his convoy at Baghdad airport.
The Kuwaiti index, the best performer in the region in 2019, was down nearly 4.1 per cent, while Saudi stocks plunged 2.2 per cent.
Dubai stocks were down 3.1 per cent with property firm Emaar Properties falling 3.7 per cent. The Abu Dhabi index fell 1.41 per cent.
Banks also took a beating, with al-Rajhi Bank down 2 per cent and Samba Financial Group down nearly 3 per cent.
“A U.S.-Iran war could shave 0.5 percentage points or more off global GDP, mainly due to a collapse in Iran’s economy, but also due to the impact from a surge in oil prices,” Jason Tuvey, senior emerging-markets economist at Capital Economics, said in a note last week.
Saudi credit default swaps, which investors buy as protection against default, rose by more than 13 per cent on Friday following Maj.-Gen. Soleimani’s killing, Refinitiv data showed.
Regional bond spreads are expected to widen on Monday, when international debt markets open, because of increased political risk, a debt banker said.
Oil prices jumped to US$63.05 a barrel on Friday, their highest level in more than three months, after Maj.-Gen. Soleimani’s killing sparked fears that conflict in the region could disrupt global oil supplies.