US-Iran war rattles global stocks as UAE trading set to resume
The US and Israel's war with Iran continued to roil global markets on Tuesday, with investor sentiment darkening as the conflict spreads across the Gulf. A wave of caution is sweeping markets, causing equities from New York to Tokyo slide.
In the Middle East, most markets have retreated, but not all — Saudi Arabia’s Tadawul posted gains on Tuesday, powered by Saudi Aramco’s 7% surge since Sunday as investors bet on higher oil prices. Investor attention is now turning to the United Arab Emirates, where local stock markets are set to reopen on Wednesday after a two-day shutdown in response to the war’s outbreak.
Details: In the United States, the S&P 500 and the Nasdaq Composite fell roughly 2.5% in early Tuesday morning trading before trimming losses. The selloff followed a volatile start to the week. On Monday, US stocks initially dipped, with travel shares hit hard before staging a modest rebound as investors bet the conflict would be contained. By Tuesday, that optimism began to fade as oil prices extended gains and fears mounted that the war could drag on for weeks.
Across Asia, Japan’s Nikkei 225 dropped 3% on Tuesday, while South Korea’s KOSPI plunged 7%. Hong Kong’s Hang Seng Index fell 1.1% and mainland China’s CSI 300 shed 1.5%. In Europe, the Stoxx Europe 600 closed down 3.2% on Tuesday.
In the Gulf, the reaction has been mixed. After sliding Monday, Saudi Arabia’s Tadawul All Share Index rose nearly 1% Tuesday despite strikes targeting Riyadh. Market heavyweight Aramco has climbed about 7% since trading opened Sunday. Kuwait also finished higher on Tuesday.
Elsewhere, Qatar’s benchmark extended losses after Doha halted liquefied natural gas production on Monday as its facilities came under fire. Oman’s main index fell 1.5%. Outside the Gulf, Egypt’s EGX30 dropped 2% on Tuesday, its third straight down session. Israel’s TA-35, closed Tuesday for a holiday, had reached record highs on Monday.
Why it matters: International benchmark Brent crude prices climbed toward $85 on Tuesday morning — reaching their highest level since July 2024 before paring some gains later in the day. Anxiety among traders appears to be growing after prices initially didn’t rise as much as expected on Monday after Gulf oil and gas shipments ground to a halt on Feb. 28 as the war erupted. Any sustained interruption in Gulf energy flows raises the risk of new inflationary pressures and global economic pain.
Wall Street’s so-called fear gauge, the CBOE Volatility Index, jumped 14% Tuesday morning, surpassing levels seen during last June’s Israel-Iran war — though still below the spike triggered by US tariff fears last April. The steady climb suggests mounting anxiety even if markets have yet to signal full-blown panic.
For energy exporters, particularly Saudi Arabia, higher crude offers fiscal relief. More broadly, however, Gulf markets face a delicate balancing act between oil-driven upside and the reputational and economic risks of a prolonged and damaging regional war.
Wednesday will mark a test for the UAE, where the Abu Dhabi Securities Exchange and Dubai Financial Market are set to reopen. Investors will be watching closely to see whether the conflict dents the UAE’s standing as a regional safe haven and business hub.
