Global equity markets buckled under the weight of the escalating US-Iran war on Wednesday, with Dubai stocks cracking nearly 5% after exchanges reopened for the first time after the attacks. Indian benchmarks plunged to 2% lows, and South Korea’s KOSPI recorded its worst single-day crash in history.
Many are calling it the Black Wednesday for stock markets, and rightly so. A wave of steep losses across the region is only expected to worsen as the war clouds shower.
Dubai stocks fall almost 5%
Dubai Financial Market General Index plunged as much as 4.9%t on Wednesday, whereas, Abu Dhabi’s FTSE ADX General Index shed 3.4%.
Bloomberg reported that the selloff was broad-based, with property and banking shares leading the decline as investors scrambled to reprice risk following Iranian drone and missile strikes
The closure of the Strait of Hormuz, and its subsequent seizure by Iran, through which nearly 30 per cent of global seaborne crude transits, has amplified fears of a prolonged energy supply disruption.
Blue-chip Emirates NBD Bank and developer Emaar Properties led the decline in Dubai, each dropping roughly 5%. In Abu Dhabi, Aldar Properties and First Abu Dhabi Bank bore the brunt, falling close to 5 per cent apiece. Budget carrier Air Arabia also slumped around 5 per cent.
To reduce panic selling, the exchange temporarily set the lower daily price limit at minus 5 per cent.
Essa Kazim, chairman of the DFM, told Gulf News that the bourse is keeping a close eye on market developments in order to “take all the necessary actions to contain fluctuations, especially the recent fluctuations due to the coronavirus.”
“Today’s measure is a result of DFM and SCA’s joint efforts to contain these fluctuations. The DFM will observe the implementation off the new fluctuation band to take any potential measures and amendments in line with the market circumstances,” he told Gulf News.
.‘Black Wednesday’ in Asia
Sensex plummeted 1,745 points (2.17%) in early trade to 78,486 before paring some losses to close 1,122 points lower at 79,116, its lowest level in 10 months. The Nifty 50 fell 385 points (1.6%) to settle at 24,480, a six-month trough. Over the past three sessions, the Sensex has shed more than 2,100 points.
Goldman Sachs has flagged Indian companies as among the most impacted in Asia by the Iran conflict, estimating that a 20% rise in Brent crude prices could trim regional earnings by 2 per cent. Societe Generale expects India’s underperformance relative to global peers to deepen given the country’s heavy dependence on imported energy, while Natixis has labelled Indian assets “most at risk” among Asian markets, according to Bloomberg.
South Korea’s KOSPI index suffered its worst day in history, plunging as much as 13 per cent before the Korea Exchange triggered circuit breakers to temporarily halt trading. The index eventually closed around 12 per cent lower, extending two-day losses to beyond 18 per cent — the steepest since 2009. The Korean won tumbled to a 17-year low.
Fears over oil and inflation
Investors are worried that the conflict could disrupt oil supplies, especially through the Strait of Hormuz. Higher oil prices could push inflation up again and delay interest rate cuts around the world.
Brent crude futures climbed 1.6% to $82.76 per barrel on Wednesday, up more than 12% for the week and hovering near the highest level since January 2025. US West Texas Intermediate crude rose to $75.48. Goldman Sachs estimates that under a baseline scenario of a six-week Hormuz closure and Brent at $85, regional inflation in Asia could rise by approximately 0.7%.
“Equity markets globally sold off sharply, with significant declines across US, European, Asian and regional UAE markets,” said Edward Bell, acting group head of research and chief economist at Emirates NBD to The National.
“Valuation impact could vary (and could potentially be more severe) as stocks derate driven by increase in perceived equity risk premium,” Citi’s analysts told CNBC.
They further added, “for real estate developers, while sales might drop as property prices and demand for properties decline, the immediate revenue from the current situation might be less severely impacted (since revenue is based on conversion of backlog on sales already made).
“However, perceived risk premium for the MENA stocks (esp. those which are well owned by foreign shareholders or appear relatively valuation rich) could go up materially.”
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.