Major Gulf bourses ease on investor caution, Fed rate-hike bets

Most Gulf equity markets closed lower on Tuesday as investors grew cautious amid progress in U.S.-Iran talks and mounting expectations that the Federal Reserve could take a more aggressive stance against inflation later this year.

The United States’ waiver on Monday allows Iran to sell oil for 60 days as part of a fledgling peace deal to end the hostilities in the Middle East, triggering a more than 3% drop in oil prices, a catalyst for the Gulf’s financial markets.

U.S. Vice President JD Vance said progress had been made in talks with Iran and that the Strait of Hormuz was open.

On Tuesday, Brent crude futures were down 26 cents, or around 0.3%, at $77.64 a barrel.

Saudi Arabia’s benchmark index dropped 0.4%, hit by a 1.3% fall in petrochemical maker Saudi Basic Industries Corp. Oil major Saudi Aramco was down 0.2%.

The Qatari index was down 0.4%, with Industries Qatar losing 1%.

Investors are watching the diplomatic process closely, with any sign of progress likely to lift sentiment across GCC markets, said George Pavel, general manager at Naga.

Regional equities may also remain driven by oil-market moves with softer crude prices possibly weighing on stocks, though a rebound in Strait of Hormuz shipping and energy exports may help limit the downside, he said, adding that markets would stay alert to further developments in the talks and their impact on traffic recovery.

Dubai’s main share index retreated 1.3%, dragged down by a 2.3% slide in blue-chip developer Emaar Properties .

In Abu Dhabi, the index lost 0.1%.

Also adding to the market pressure globally are increased expectations the Fed might accelerate its rate-hike schedule under the leadership of new Chair Kevin Warsh.

Fed funds futures are pricing an implied 54% probability of at least two 25-basis-point hikes before the end of the year, compared with a 15.2% chance a week ago, according to the CME Group’s FedWatch tool.

Gulf markets tend to track shifts in U.S. monetary policy expectations as most regional currencies are pegged to the dollar.

Outside the Gulf, Egypt’s blue-chip index declined 1.6%.