Dubai Stocks Plunge 5% After Two-Day Halt as Geopolitical Risks Hit Regional Markets
After an unusual two-day trading halt, the Dubai stock market reopened on Wednesday, with the benchmark index plummeting nearly 4.9% in a single day, marking its largest single-day drop since May 2022. This sharp fluctuation stemmed from missile and drone attacks by Iran on airports, ports, and residential areas within the UAE, prompting regulators to suspend trading to assess the risks. Upon reopening, pent-up selling pressure was released, and market sentiment noticeably tightened.
Abu Dhabi's main index simultaneously fell by over 4%, and the Nasdaq UAE 20 index also declined by 4.3%. To curb extreme volatility, both exchanges temporarily lowered the daily limit for individual stock declines to -5% to prevent panic selling while safeguarding price discovery mechanisms.
The real estate sector was among the hardest hit. Emaar Properties fell by nearly 5%, and Abu Dhabi's Aldar Properties also recorded a similar decline. Analysts pointed out that if the Middle East situation continues to escalate, it could suppress the earnings expectations of development companies in the long term and increase equity risk premiums, thereby lowering valuation levels.
Insurance and investment companies suffered even more severe impacts. Al Buhaira National Insurance's stock price plummeted by nearly 10%, and Umm Al Quwain General Investments fell by nearly 9%. The overall market experienced widespread declines, reflecting investors' comprehensive reassessment of the geopolitical risk exposure of companies in the region.
The aviation industry also came under pressure. UAE's low-cost airline Air Arabia's stock price declined by approximately 5% due to the closure of regional airspace, leading to the cancellation or delay of over 20,000 flights. Partial damage to Dubai International Airport further exacerbated the downward pressure on tourism-related sectors.
Despite rising international oil prices, energy stocks did not receive support. Dana Gas and TAQA fell by approximately 5% each in the Abu Dhabi market. Companies under the Abu Dhabi National Oil Company (ADNOC) engaged in drilling, fuel distribution, and logistics also experienced concentrated selling, with market concerns about supply chain and operational safety risks.
As of the day, the total market capitalization of the Abu Dhabi Securities Exchange and the Dubai Financial Market was approximately $1.1 trillion, with tens of billions of dollars evaporating in a single day. Regulators have requested listed companies to assess the financial and operational impact of the geopolitical events as soon as possible and disclose material matters in a timely manner.
In contrast, the Saudi stock market bucked the trend with a slight increase of approximately 1%, with Al Rajhi Bank and Saudi Basic Industries Corporation (SABIC) seeing their stock prices rise, despite the latter announcing an annual net loss due to overseas asset impairments. The Qatar index edged up slightly, while the Oman, Bahrain, and Kuwait markets saw moderate declines. Global markets continue to digest the spillover effects of the US-Iran conflict, with Asian stock markets continuing to sell off, while Europe experienced a technical rebound after two days of correction.