Kuwait Markets Face Mild Decline in June Amid Geopolitical Uncertainty and Rate Hike Concerns
Kuwait: The Kuwait Financial Centre “Markaz” reported that the Kuwait markets experienced a challenging month in June, demonstrating resilience despite ongoing geopolitical tensions. The Kuwait All Share Index saw a slight decline, primarily influenced by the underperformance of banking sector stocks and a slowdown in the real estate market.
The banking sector faced significant pressure, with seven out of nine banks reporting declines, leading to a 2.8% drop in the banking index. Notably, the National Bank of Kuwait and Kuwait Finance House, the two largest banks in the country, recorded declines of 5.3% and 1.7%, respectively. In contrast, Oula Fuel Marketing and The Commercial Real Estate Company emerged as the top performers in the premier market, achieving monthly gains of 24.8% and 10.2%.
Key Market Developments
Boursa Kuwait has introduced a new Exchange-Traded Fund (ETF) framework that includes specific governance provisions, facilitating the launch of new ETFs. This initiative is expected to enhance the exchange’s product offerings and attract more investors.
In a significant regulatory update, Kuwait has established a comprehensive framework for long-term residency permits for foreign investors, allowing stays of up to 15 years. These new regulations aim to streamline investment residency processes while enforcing stringent legal, financial, and compliance requirements to bolster oversight and attract foreign capital.
Domestic credit growth showed a robust increase of 6.7% year-on-year in May, driven by a resurgence in corporate lending. However, the real estate market in Kuwait faced challenges, with total transaction values plummeting by 17.8% month-on-month and 38% year-on-year, amounting to KD 228.9 million in May 2026. This figure represents the second-lowest monthly sales value in over two years, reflecting ongoing investor uncertainty.
GCC Market Performance
The performance of markets within the Gulf Cooperation Council (GCC) remained mixed. Following a significant downturn since the onset of the U.S.-Iran conflict, many markets showed signs of recovery in June. The Dubai Financial Market (DFM) General Index recorded the largest gain at 3.4%, reducing its year-to-date losses to 1.5%. This rebound was attributed to foreign investors reassessing the situation following developments regarding a preliminary U.S.-Iran peace agreement, alongside the UAE’s strong economic fundamentals and robust corporate earnings.
In contrast, the overall S&P GCC Composite Index fell by 1.3% during the month. Ongoing regional uncertainties surrounding peace negotiations and the absence of a clear resolution kept investors cautious. The Tadawul Index in Saudi Arabia decreased by 2.5%, while Abu Dhabi’s ADX saw a modest increase of 1.1%. Qatar’s QSE, however, declined by 3.0%.
Saudi Arabia’s Economic Resilience
Despite regional challenges, Saudi Arabia’s economy has shown resilience. The International Monetary Fund (IMF) projects GDP growth to decelerate to 2.0% year-on-year in 2026, down from 4.5% in 2025, while anticipating a reduction in the fiscal deficit and an average inflation rate of 2.3%. In April, Saudi Arabia’s merchandise trade surplus doubled, with exports rising by 9.3% year-on-year, largely driven by an 11.7% increase in oil exports. The Saudi Cabinet has also approved new regulations permitting foreign real estate ownership in select projects across Riyadh, Makkah, and Madinah to stimulate investment in the property sector.
The UAE has demonstrated resilience amid regional disruptions, with Moody’s reaffirming its Aa2 sovereign rating with a Stable Outlook, citing strong fiscal buffers and low debt levels. The country’s oil exports rebounded to 4.3 million barrels per day in early June, approximately 85% of pre-conflict levels, supported by alternative export routes and storage drawdowns.
Global Market Trends
Global markets concluded their two-month bull run in June 2026, as the hawkish stance of the U.S. Federal Reserve prompted a retreat in both developed and emerging market equities. The MSCI World Index, S&P 500, and Nasdaq Composite Index registered declines of 0.8%, 1.1%, and 0.2%, respectively. Heightened expectations of a potential Fed rate hike by September 2026, coupled with a broad repricing of high-valuation tech stocks amid tighter financial conditions and macroeconomic uncertainty, contributed to a risk-off sentiment.
Emerging markets, as indicated by the MSCI EM Index, fell by 1.7% during the month, influenced by a stronger U.S. dollar and expectations of rising U.S. interest rates. However, Taiwan and India recorded gains of 3.1% and 2.3%, respectively, in June 2026.
The yield on 10-year U.S. Treasury notes experienced a slight decrease of 1 basis point, settling at 4.44%. The Federal Reserve maintained interest rates in the range of 3.50% to 3.75% but signaled a potential 25 basis point rate hike in 2026, raising inflation forecasts and ending forward guidance under Chair Kevin Warsh. This shift towards a more data-dependent policy approach has led markets to adjust expectations for future policy tightening.
Oil Prices and Future Outlook
Brent crude oil prices fell significantly over the month, closing at USD 72.92 per barrel, reflecting a 20.8% decline. This drop was primarily driven by expectations that the U.S.-Iran ceasefire would hold, overshadowing recent escalations. Improved oil flows through the Strait of Hormuz and hopes for avoiding a broader conflict helped mitigate the geopolitical risk premium, despite ongoing regional tensions.
As July 2026 approaches, the trajectory of the U.S.-Iran ceasefire and the direction of diplomatic developments are expected to influence market movements. While some volatility has been priced in, any significant disruptions could impact both equity and debt markets. GCC equities are likely to remain sensitive to fluctuations in oil prices, geopolitical events, and expectations of further U.S. interest rate hikes. Inflation data from the U.S. and statements from Federal Reserve officials will also be critical factors to monitor.
Source: www.zawya.com
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Published on 2026-07-04 19:44:00 • By the Editorial Desk
