Sensex vs Middle East: Why India is among the ‘worst hit’ as Saudi gains

The war in the Middle East has caused wide destruction of infrastructure, including airports, oil facilities, buildings / offices and ships. Importantly, the oil supply chain emanating from the gulf countries that use the Strait of Hormuz for transportation has been severely constrained.

As a result, investors globally are looking at the economic impact of war and its broader consequences.

While much of the focus has been on how this is going to impact countries dependent on the gulf countries for oil and gas among other things, we thought it may be interesting to see how the impact has been on the producing countries themselves.

A rather simplistic measure of this is to look at the various stock markets in the war-torn Middle East, and to see how the different indices in the region have performed since the beginning of the current conflict at the end of February, 2026.

This analysis also serves to understand how each country in the region is coping, in terms of financial markets and the current war.

Take a look…

Geopolitical Impact on Gulf Bourses

Better performing markets in Middle East

The best performing market in the Gulf is the Muscat Stock Exchange MSX 30 (Oman), which has gained nearly 5% since the start of the conflict on 28 February, 2028. It is understood that several companies in this country have hiked their dividend payouts ahead of the annual general body meeting of shareholders in May and June.

Muscat media report highlights higher dividends from companies in diverse sectors including banks, ports and oil companies. However, the Muscat stock market has a capitalisation of barely US$ 79 billion, and therefore it’s too small to be of consequence.

Meanwhile, Tadawul All Share Index (Saudi Arabia) has gained nearly 2% since the start of the US and Israel war on Iran. Global news sites highlight that with global crude oil prices well above US$ 100 per barrel, it has pushed the main stock on the Saudi bourses, Saudi Aramco to record levels. Also, the surge in Saudi Aramco stock price has helped offset the weakness in other sectors like tourism and infrastructure.

Saudi Aramco has a market capitalisation of nearly US$1.7 trillion, while the total stock market capitalisation in the country is nearly US$ 2.4 trillion.

Kuwait is another oil rich nation in the region. Its stock market has been broadly flat since the start of the conflict, and that’s despite nearly half of its oil output curtailed since the start of the war. The Kuwait sovereign wealth fund- Kuwait Investment Authority (KIA) has nearly US$ 1 trillion in assets and it is understood to have helped to reduce the broad volatility in this stock market.

The Iranian stock market index has barely moved on account of very limited trading in the region.

Several markets in the Middle East are understood to be closed on Thursday on account of Eid celebrations, and Friday is a weekly holiday in the region.

Laggards in the Middle East

The worst performing stock markets in the region are in UAE – DFM General Index (DFMGI) in Dubai has dropped nearly 14.6% since the start of the current conflict. The FTSE ADX General in Abu Dhabi has declined nearly 8.4%.

The bomb attacks in several residential colonies and malls in Dubai have disturbed the image of this regional financial hub, as a safe haven for finance companies / banks and tourists. It is understood that the fear of potential weakness in real estate and financial stocks has pushed the Dubai stock market significantly lower since the start of the war.

In Abu Dhabi too, property and bank stocks have taken a hit. As a result, the stock market in Abu Dhabi has weakened nearly 8.4% since the end of February 2026.

The stock market in Qatar has also dropped by more than 5% on account of missiles and bombs launched by Iran on this leading producer of liquified natural gas (LNG).

The Indian Connection: Sensex Under Pressure

Interestingly, one of the worst hit stock markets among the ones we studied was India. The Sensex has weakened nearly 8.7% since the start of the war.

The Indian stock markets have been hammered for months now on account of incessant selling by FIIs. This was due to concerns of a lack of earning growth, and pricey valuations.

Now, with the war in the gulf, India’s macro-outlook has been muddied too, worsening overall sentiment.

India’s dependence on imported oil and gas is not a problem that has a short-term fix. And it could be argued that among the larger economies in the region, in economic terms, we may take a big hit. The stock markets are probably factoring this in.

Conclusion

The stock markets in the region have reacted in ways one may not have expected before the war started. Dubai and Abu Dhabi were never expected to take a hit on account of the war. Now, they dominate the headlines.

Saudi Arabia too got unexpectedly involved in the war. But then it stands to directly benefit from higher oil prices if it can export it. So far, the markets believe this will play to its advantage, albeit marginally.

India, on the other hand, has taken perhaps the ‘worst hit’ in terms of absolute stock market value destruction.

Disclaimer:

Amriteshwar Mathur is a financial journalist with over 20 years of experience.

The writer and his family have no shareholding in any of the stocks mentioned in the article.

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