• York Investment & Finance

Global Markets Overview: Middle East

By Anna Webb, Analyst at the York IFS Global Market Telegraph

Gulf markets saw positive gains throughout November on the back of renewed vaccine hopes. Middle Eastern countries await to see how their relationship with the US may change following Biden’s victory whilst wheat and bread shortages plague Syria, a country in crisis.

Gulf markets saw significant gains over the last month on the back of renewed Covid-19 vaccine optimism, with the Tadawul All-Share Index having risen 11% since the start of November. Investors are optimistic that a vaccine coming to the market in early 2021 could help economies recover at a faster pace than expected [i]. Positive data coming out of Chinese manufacturing has also improved investor sentiment [ii], after October saw declines in Gulf indexes due to concerns around the prolonged impact of Covid-19. Oil prices also reached their highest level since March last week on the back of the positive vaccine news, having suffered a historic crash at the start of the pandemic [iii].

Following the Biden victory in the US presidential election, all eyes are on the US’ future relationships with the Middle East and the approach the Biden administration will take. Leaders across the Gulf region suspect that the result may signal a shift to a more civil and multilateral way of doing business [iv]. Saudi Arabia will be watching the US particularly closely, as a Democrat president could lead to a significant shift in the two countries’ relationship with Biden closely considering arms sales and human rights issues. Saudi Arabia attempted this week to gain favour with Biden, pledging to resolve the Qatar crisis by ending the blockade of their gas-rich neighbour [v]. Biden has also pledged to re-join the 2015 nuclear accord Iran signed with the US and five other world powers, which Trump unilaterally withdrew the US from in 2018, provided Tehran comes back in compliance with its uranium enrichment limits.

Wheat and fuel shortages now overwhelm Syria, following years of intense fighting under the regime of President Bashar al-Assad who now controls two-thirds of the region. Syria is an economy on the brink of collapse, as political conflict is exacerbated by pandemic-related lockdowns and the Lebanese banking crisis. Once a country classified as ‘middle-income’ and an oil and wheat exporter, bread and fuel shortages are now a reality; high inflation has forced many families to cut back on meat and fruit, as the cost of an average family shop is now 90% higher than it was just six months ago. Critics have argued that government corruption has allowed profiteering to undermine the economy, whereas Assad blames international sanctions for preventing key imports. The Lebanese banking crisis is also certainly playing a role, with a minimum of $20bn estimated to be stuck in illiquid Lebanese banks [vi].

This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 13.1 in early December 2020.

Reference list: [i] https://www.reuters.com/article/mideast-stocks-int/major-markets-log-weekly-gains-on-vaccine-hopes-idUSKBN2860WG [ii] https://uk.reuters.com/article/global-markets/global-markets-shares-take-a-breather-after-stellar-month-china-data-upbeat-idUKL4N2IG03T [iii] https://www.ft.com/content/cb6d26c6-c8e0-4fc3-96b0-c0e6bc64b1b6 [iv] https://www.ft.com/content/9c4b656d-c1dd-4a42-a03b-87174dfe2792 [v] https://www.ft.com/content/ae7e041f-ff4b-4df7-8b2b-06488e17a91c [vi] https://www.ft.com/content/f3ccc3a7-c697-412a-9b99-18944de5c108

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