Gulf markets plunge on U.S.-Iran tensions, Aramco at lowest since IPO

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Dubai (Reuters) – Kuwaiti and Saudi stocks led Gulf stocks sharply lower in late afternoon trade on Sunday in the wake of a U.S. drone strike in Baghdad that killed Iran’s military commander.

Shares of oil giant Saudi Aramco (2222.SE) fell 1.7% to their lowest level since listing last month in a record initial public offering (IPO).

Aramco shares dropped to 34.55 riyals a share, the lowest level since it started trading last month.

Iranian military commander Qassem Soleimani, the architect of Tehran’s overseas military operations was killed on Friday in a U.S. drone strike on his convoy at Baghdad airport.

The Kuwaiti index, the best performer in the region in 2019, was down nearly 4.1%, while Saudi stocks .TASI plunged 2.2%.

Dubai stocks .DFMGI were down 3.1% with property firm Emaar Properties(EMAR.DU) falling 3.7%. The Abu Dhabi index .ADI fell 1.41%.

Banks also took a beating, with Al Rajhi Bank (1120.SE) down 2% and Samba Financial Group (1090.SE) down nearly 3%.

“A U.S.-Iran war could shave 0.5 percentage points or more off global GDP, mainly due to a collapse in Iran’s economy, but also due to the impact from a surge in oil prices,” Jason Tuvey, senior emerging markets economist at Capital Economics, said in a note last week.

Saudi credit default swaps SAGV5YUSAC=MG, which investors buy as protection against default, rose by more than 13% on Friday following Soleimani’s killing, Refinitiv data showed.

Regional bond spreads are expected to widen on Monday, when international debt markets open, because of increased political risk, a debt banker said.

Oil prices LCOc1 jumped to $63.05 a barrel on Friday, their highest level in more than three months, after Soleimani’s killing sparked fears that conflict in the region could disrupt global oil supplies.

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