Equity markets across the Middle East declined sharply on Monday as the ongoing military confrontation between Israel and Iran raised investor concerns over regional stability, economic fallout and prolonged geopolitical risk.
The Saudi Stock Exchange, the largest in the region, recorded a 2.4% decline in its benchmark Tadawul All Share Index (TASI), led by losses in the banking, petrochemical and real estate sectors.
The decline followed reports of intensified Israeli airstrikes on Iranian military infrastructure and continued missile and drone retaliation by Iran targeting Israeli cities.
In Egypt, the EGX30 Index dropped 3.1%, as the Egyptian pound depreciated further in unofficial local markets, crossing ₦50 per dollar.
Investors are reacting to fears that further escalation could affect Suez Canal operations and regional trade routes critical to Egypt’s fragile economy.
Qatar’s QE Index fell 1.9%, weighed down by financial and industrial stocks. Analysts pointed to growing investor unease over energy security, given the possibility of supply chain disruptions if hostilities spread to Gulf nations or impact maritime oil transport through the Strait of Hormuz.
UAE markets were not spared. Dubai’s DFM General Index dropped 1.5% while Abu Dhabi’s ADX fell 1.2%. Investors shifted to defensive positions amid uncertainty over how long the conflict might last and whether Iranian proxies could engage targets across the Gulf Cooperation Council (GCC) states.
The geopolitical escalation, now entering its fourth day, has resulted in the death of at least 247 people across both countries. Iran has reported 224 fatalities, most of them civilians while Israel confirmed 23 deaths and over 400 injuries following drone and missile strikes by Iran.
Israeli airstrikes have reportedly damaged nuclear and military infrastructure in Tehran and surrounding provinces.
The sharp deterioration in security has weighed on investor sentiment and triggered capital flight into safe-haven assets. Gold prices rose, and global oil benchmarks such as Brent crude climbed to near $84 per barrel before stabilizing.
West Texas Intermediate (WTI) hovered around $74 amid speculation that Iranian retaliation could include targeting oil infrastructure or disrupting shipping routes.
Regional defense stocks posted mixed results. In Tel Aviv, Elbit Systems Ltd. rallied over 6%, reflecting expectations of increased defense spending by the Israeli government. However, broader indices were down as fears of a wider war spooked investors.
Israel’s government has indicated the conflict may expand if Iran does not back down. Defense Minister Yoav Gallant stated that Tehran’s command structure is being systematically dismantled.
National Security Adviser Tzachi Hanegbi noted that regime change is not Israel’s objective but acknowledged it could be an outcome of continued military operations.
Meanwhile, international stakeholders are watching closely. The G7 summit in Canada is expected to address the Israel-Iran confrontation. US President Donald Trump stated on social media that peace “will happen soon” but added that “sometimes they have to fight it out,” signaling limited appetite for immediate intervention.
With no diplomatic breakthrough in sight, analysts expect continued market volatility across the Middle East. Risk premiums are likely to rise, particularly for assets tied to energy, transportation, and tourism, which are most vulnerable to protracted conflict in the region.
