Middle Eastern Markets Plunge Amid Israel-Iran Conflict, Egypt's EGX 30 Drops 7.4%

On Sunday, most Middle Eastern markets experienced significant drops as investors grew increasingly concerned about the potential for the conflict between Israel and Iran to widen. Egypt's main stock index was the worst performer, plummeting by approximately 7.4% in its first trading session since the conflict began on Friday. This sharp decline was mirrored in other regional markets, with Israel's Tel Aviv stock market falling by 1.7% and Saudi Arabia's benchmark index dropping by 3.6% in early trading.

The conflict intensified as Israel expanded its attacks on Iran beyond nuclear and military facilities to include oil infrastructure. According to reports, two refineries in Iran's southern Bushehr province were targeted by Israeli airstrikes, resulting in explosions and fires that have since been contained. The South Pars refinery and the Fajr Jam refinery were among the facilities affected, marking the first time Israel has struck Iran's energy infrastructure since the Iran-Iraq War in the 1980s.

The heightened tensions have raised fears of a broader regional conflict, leading to a wave of selling across Middle Eastern markets. The collective decline in stock prices reflects investor anxiety over the potential for further escalation and the economic repercussions that could follow. The situation remains fluid, with both sides engaged in a cycle of retaliation that has the potential to draw in other regional players.

The geopolitical risks associated with the conflict have also had an impact on global markets, with oil and gold prices surging as investors seek safe-haven assets. The uncertainty surrounding the conflict has led to a flight to safety, with investors shying away from riskier assets in favor of more stable investments. The situation underscores the interconnected nature of global markets and the potential for geopolitical events to have far-reaching economic consequences.

Egypt's main stock index, EGX 30, saw all 31 of its constituent stocks decline, with the Egyptian pound falling to 50.6 against the US dollar. Israel's stock index managed to recover some losses, rising 0.6% due to a surge in the stock price of defense supplier Elbit Systems. The company, which manufactures rockets, drones, and anti-aircraft systems for the Israeli military, has also been betting on growth in its European business.

In Saudi Arabia, most stocks joined the sell-off, with 243 out of 253 constituent stocks of the benchmark index declining. However, Saudi Aramco's stock price rose 1.2%, offsetting some of the losses. The company benefited from the surge in oil prices following the conflict. Other regional markets, including Kuwait and Qatar, also experienced declines.

The conflict has led to the cancellation of nuclear talks between Iran and the United States, further complicating the geopolitical landscape. The situation has also weakened expectations for cross-asset investments based on a return to peace in the region. The coming days will be crucial in determining the trajectory of the conflict and its impact on regional and global markets.