• York Investment & Finance

Global Markets Overview: Middle East

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

The Tadawul All-Share Index has performed strongly in the first half of March gaining 5.6% in the last two weeks as it tracks moves in oil markets, reaching the highest level since 2015. Brent crude oil rose above $70 a barrel this week for the first time since before the pandemic began, after a drone attack on a petroleum storage tank in Saudi Arabia, the world’s largest oil exporter, which brought into question the security and stability of global supplies. Oil prices have been further supported by OPEC+ deciding against increases in output, and as a result Goldman Sachs Group Inc. raised its third quarter forecast to $80 a barrel. Positive sentiment was also supported by the potential hopes of an end to the coronavirus pandemic, with the Dubai Financial Market General Index gaining from renewed optimism this week and rising 3.1%.

Tensions between the US and the Middle East have risen this week, as Iran rejected the offer of direct talks with the US on a nuclear deal. Donald Trump pulled out of the deal in 2018 which placed limits on Iran’s nuclear programme in exchange for sanctions relief, and the US hoped that this was an opportunity to repair relations. Biden’s administration also released a CIA report this week containing intelligence that Mohammed bin Salman, crown prince of Saudi Arabia and the kingdom’s de facto ruler, approved an operation to “capture or kill” journalist Jamal Khashoggi in 2018. Biden has come under criticism this week for failing to take harsh action against the prince, after the US Press Secretary said the US wanted to “recalibrate” relations with Saudi Arabia, but not destroy them by imposing sanctions directly on Prince Mohammed.

The Middle East appears to be seeing the ‘light at the end of the tunnel’ with regards to the coronavirus pandemic, after Israel lifted restrictions this week following 4m of its 7m population having been vaccinated with the Pfizer vaccine. Saudi Arabia also appears to be moving out of restrictions, having administered more than 130,000 vaccinations last Thursday, the highest since the programme began. Despite optimism, many in the Middle East remain sceptical about whether this will truly be the end of the pandemic once and for all with a Channel 12 news poll showing more than three quarters of Israelis were wary of declaring the pandemic over.

The vaccine has furthermore sparked unrest in Lebanon after a number of the country’s senior leadership received the vaccine in parliament this week, adding to growing distrust of the government amongst the population. Lebanon continues to battle against a plummeting currency crisis, with the Lebanese pound having dropped 20% since the end of 2020. This collapse means that the monthly minimum wage of L£675,000 is worth just $67.50. With 45% of the population now living under the poverty line, there is anger amongst the people with protests and violence an almost daily occurrence.

This article was first published in the University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 4 in late March 2021.

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