DUBAI: Oil has fallen to its lowest level in more than two months, and UAE equity markets have gained, as investors bet that diplomacy rather than escalation will shape the next phase of the Iran conflict.
Brent crude fell by more than six per cent early on Tuesday, to about $92 a barrel, before easing a little further to around $91.60. US benchmark WTI traded near $85.80. Analysts at MUFG noted that prices have reached their lowest since August as geopolitical threats to the region moderate.
Why oil dropped
The move follows a shift in tone from Washington. President Donald Trump said on Monday that renewed military action against Iran did not seem very necessary and that he expected the war to end fairly soon. Traders read that as a lower risk of a sudden supply shock around the Strait of Hormuz.
The fall is large when set against recent levels. Late last month, Brent was trading above $117 a barrel as Houthi attacks hit Saudi oil facilities and tankers were reportedly struck near Hormuz. That puts today’s price roughly a fifth lower in a matter of days.
Physical markets tell a more nuanced story. Murban, the UAE’s benchmark crude, rose by more than $3 to about $99 a barrel even as futures fell. MUFG says regional exports of oil and gas are rising towards pre-conflict norms, helping to narrow the gap between futures and physical prices. Bloomberg tanker-tracking data cited by Enterprise showed combined crude shipments from Saudi Arabia, the UAE, Iraq and Kuwait reached about 15.5 million barrels a day in October, up 10 per cent from September and broadly in line with pre-war levels.
UAE stocks respond
Equities in the Gulf reacted positively. Gulf bourses closed mostly higher on Monday after Trump signalled that fresh strikes on Iran were unlikely while talks continue. Dubai’s main index gained about one per cent, led by Emaar Properties, which rose 2.4 per cent, and Abu Dhabi’s index also rose about one per cent. Finimize put the Abu Dhabi gain at 0.96 per cent and the Dubai gain at 1.03 per cent.
The pattern is worth noting. Lower oil would ordinarily weigh on energy-linked markets. This time investors appear to be valuing reduced regional risk more highly. ADNOC Distribution was among the movers after it reported third-quarter profit up 0.9 per cent from a year earlier, and its shares gained more than three per cent.
A choppy few weeks
The rally follows a rough patch. Abu Dhabi’s index recently fell to an 18-month low after International Holding reported a 28 per cent drop in third-quarter profit, while Dubai drew support from Emaar’s offer of up to $3.43 billion to buy out Emaar Development
Those swings underline how sensitive local markets have become to headlines from the Gulf. Company results matter, but daily direction has often been set by news from Hormuz, Riyadh or Washington.
Relief at the pump
Households have already seen some benefit. For November, Special 95 petrol is priced at Dh4.04 a litre, down from Dh4.28 in October. Super 98 is Dh4.16 and E-Plus 91 is Dh3.97, each lower than last month, while diesel eased slightly to Dh4.75. Those prices were set before this week’s oil decline, so any further fall in crude could feed into December’s announcement, though the UAE fuel committee sets prices monthly and does not follow daily moves.
Risks remain
The outlook is far from settled. Shipping threats around Hormuz continue, and attacks on Saudi infrastructure, including the East-West pipeline, have persisted. Iran has also disputed Washington’s account of progress in talks, so sentiment could turn quickly if negotiations stall or a major incident occurs
For now, markets are pricing in a gradual cooling. Investors, motorists and businesses across the UAE will be watching whether that holds in the days ahead.
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