A nuclear deal between Iran and six global powers, which looks imminent now, may negatively affect most stock markets in the Gulf and especially Saudi Arabia on Tuesday as it puts pressure on an already oversupplied oil market.
Brent crude has fallen 0.9 per cent in Asian trade and U.S. oil has lost 1.4 per cent as the market awaits the agreement. Sources at the Iran talks in Vienna have said an announcement is likely within hours.
Analysts say it would take Iran many months to fully ramp up its oil export capacity following any easing of economic sanctions on Tehran. But even a modest initial increase could be enough to pull international oil prices down further, as the market is already producing around 2.5m barrels per day above demand.
A removal of trade and banking sanctions could benefit Dubai, a traditional centre for trade with and investment in Iran, and benefit Gulf logistics and transport companies. But excluding Dubai, most economies in the region have little exposure to Iran, so a nuclear deal’s impact on oil prices might overshadow, at least initially, any other factors.
Saudi Arabia’s bourse is the most sensitive in the Gulf to oil prices because of its heavyweight petrochemical sector, and it underperformed the region on Monday.
Dar Al Arkan, one of Saudi Arabia’s largest property developers, may see selling after it reported a 42 per cent drop in second-quarter net profit on Tuesday, missing analysts’ forecasts by a large margin.
But National Shipping Co of Saudi Arabia (Bahri), the exclusive oil shipper for Saudi Aramco, may gain after the firm said on Monday its second-quarter net profit more than doubled because of increased fleet size and higher freight rates.
In Dubai, investors’ expectations for upcoming earnings may become more positive after Deyaar Development, the first local property firm to post earnings this season, recorded a 37.5 per cent jump in second-quarter net profit.
Bank Muscat, Oman’s largest lender, posted a 0.2 per cent dip in its second-quarter net profit on Tuesday but beat analysts’ estimates; it made a profit of OMR46.5m ($120.8m) while analysts had on average forecast OMR 40.71m.
In global markets, Asian stocks have given up early gains and moved into negative territory, led by Chinese indexes.