DUBAI, United Arab Emirates (AP) — Stock markets across the Middle East plunged Monday as the region grappled with a double blow: a steep decline in global oil prices and the disruptive impact of new U.S. tariffs that threaten to upend trade dynamics and squeeze public finances across energy-dependent economies.
Benchmark Brent crude dropped nearly 15% over the last five trading days, falling to just over $63 per barrel—a dramatic decline from more than $90 a year ago. The sharp drop in crude prices puts immediate fiscal pressure on oil-exporting nations, many of which rely on higher oil revenues to fund government budgets, infrastructure projects, and subsidy programs.
Making matters worse, the Biden administration’s new tariff policy, announced last week, slapped 10% levies on imports from Gulf Cooperation Council (GCC) nations—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Other Middle Eastern countries faced even steeper tariffs, with Iraq hit at 39% and Syria at 41%.
“With these measures and the expected retaliatory actions that could follow, the stability and predictability of international trade could be seriously undermined,” warned PwC Middle East in an advisory to its clients on Monday.
Markets in Freefall
The reaction was swift across regional markets:
- Dubai Financial Market (DFM) slumped 6% on Monday, led by a 9% loss in heavyweight Emaar Properties.
- The Abu Dhabi Securities Exchange dropped 4% amid broad-based selling.
- Saudi Arabia’s Tadawul index fell over 6% on Sunday, the region’s first trading day, and extended losses by another 3% on Monday.
A key driver of Saudi Arabia’s losses was its state-owned oil giant, Aramco, which shed more than 5% on Sunday alone, continuing its decline into Monday and erasing billions in market capitalization. Aramco’s downturn underscores the link between oil prices and the fortunes of Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification agenda, which depends heavily on oil revenue.
Oil Output Increases Add to Market Anxiety
The declines came just days after OPEC+ members, including Saudi Arabia, the UAE, and Russia, agreed to ramp up oil production, accelerating supply levels for the first time since 2022.
“OPEC+ has shifted its market management strategy from a steady incremental increase in output to monthly announced targets, bringing forward higher output levels for May this year,” said a note from Emirates NBD Bank, a Dubai-based lender majority-owned by the state.
“That will leave oil markets grappling with additional volatility as they assess the negative impact on global trade of the tariffs announced by the Trump administration,” the bank added.
Economic Outlook Clouded
Analysts warn that the combination of weakening oil prices and escalating trade tensions could threaten fiscal balances and derail diversification strategies in countries like Saudi Arabia and the UAE. Both nations have launched multi-billion-dollar infrastructure and investment plans aimed at reducing reliance on hydrocarbons—initiatives now facing significant headwinds.
In the near term, governments may be forced to revisit subsidy reforms, delay major projects, or draw further from sovereign wealth funds to buffer against growing deficits.
With tariff retaliation and oil market uncertainty on the horizon, regional economies appear poised for a turbulent quarter—unless energy prices stabilize and global trade tensions de-escalate.
