Most major stock markets in the Gulf fell in early trade on Monday, amid concerns that the US Federal Reserve would continue with aggressive rate hikes to tame inflation.

On Friday, two Fed policymakers signalled that interest rates would need to go higher after a run of strong economic news, despite the central bank raising rates by 450 basis points in 11 months.

Most Gulf Cooperation Council countries, including Qatar, Saudi Arabia and the United Arab Emirates have their currencies pegged to the US dollar and follow the Fed’s policy moves closely, exposing the region to a direct impact from monetary tightening in the world’s largest economy.

Saudi Arabia’s benchmark index dropped 0.3%, on course to extend losses for a second session, hit by a 1.4% fall in Riyad Bank. However, the index’s losses were limited by a 6.1% jump in Etihad Etisalat Co, which reported a sharp rise in annual profits on Monday.

The telecom firm also announced cash dividend of 1.15 riyals ($0.3066) per share for the year 2022.

In Qatar, the index lost 0.2%, with the Gulf’s biggest lender Qatar National Bank declining 1.4%. On the other hand, Baladna, the country’s largest dairy and beverage company, advanced 4.3% after it signed a manufacturing agreement with cheese and snack giant The Bel Group. Dubai’s main share index eased 0.2%, weighed down by a 0.9% drop in blue-chip developer Emaar Properties.

Saudi bourse falls on Fed worries; Qatar gains

The Abu Dhabi index, however, bucked the trend to edge 0.1% higher.

Oil prices - a key catalyst for the Gulf’s financial markets - rose amid optimism over China’s demand recovery, concerns that underinvestment will crimp future oil supply and as major producers keep output limits in place.