Middle Eastern Markets Plunge Amid US Tariffs and Oil Price Drop

In early April 2025, Middle Eastern stock markets experienced significant declines, driven by newly imposed U.S. tariffs and a sharp drop in oil prices. On April 6, the Saudi benchmark index fell 6.8%, marking its steepest decline since May 2020. Major financial institutions like Al Rajhi Bank and Saudi National Bank lost nearly 6%, while oil giant Saudi Aramco dropped 5.3%. Other Gulf markets also saw substantial losses: Qatar’s index fell 4.2%, Kuwait's by 5.7%, and Egypt’s EGX30 shed 3.3%.

The downturn was exacerbated by a steep drop in oil prices. Brent crude fell over 3% on April 6, reaching $63.30 per barrel, its lowest level since April 2021. This decline was driven by fears that intensifying U.S.-China trade tensions could trigger a global recession, thereby reducing crude demand.

In early April 2025, President Donald Trump imposed sweeping tariffs on imports from various countries, including Middle Eastern nations. These tariffs ranged from 10% to 50% and were intended to address perceived trade imbalances. The implementation of these tariffs led to significant volatility in global financial markets, with major indices in Asia, Europe, and the Middle East experiencing sharp declines.

China responded to the U.S. tariffs by implementing its own 34% tariffs on American goods, further escalating trade tensions. This tit-for-tat approach has heightened fears of a global trade war, with potential repercussions for global economic growth and stability.

The combination of falling oil prices and new U.S. tariffs has had a profound impact on Middle Eastern economies, which are heavily reliant on oil revenues. Stock markets across the region have experienced significant declines, with major indices in Saudi Arabia, Qatar, Kuwait, and Egypt all posting substantial losses.

The downturn is exacerbated by OPEC+’s decision to accelerate oil production increases, adding further volatility to the market. Pakistan faced similar challenges, with its stock exchange halting trading after a 5% drop due to a 29% U.S. tariff. Officials in Islamabad plan to negotiate in Washington amid fears of prolonged instability.

Recent developments have raised concerns about the potential for a global recession. Treasury Secretary Scott Bessent stated there is "no reason" for markets to factor in a recession, despite recent economic volatility spurred by President Trump's tariffs. Speaking on "Meet the Press," Bessent emphasized that lower oil prices—down nearly 15% in two days—and reduced interest rates would benefit working Americans more than the harms of falling stock prices. Although stocks fell over 10% in just two days, erasing more than $6 trillion in investor assets, Bessent remained confident in the resilience of the U.S. economy.

However, global financial markets experienced significant declines on Monday, triggered by President Donald Trump's imposition of sweeping new tariffs on imports from most of the world. Major markets in Asia, Europe, and the Middle East plunged, with Wall Street recently enduring a two-day meltdown. The tariffs, aimed at reducing the U.S. trade deficit, have been criticized globally, prompting retaliatory measures from China and other nations. China condemned the U.S. for unilateralism and economic bullying, while implementing its own 34% tariffs on American goods. European indices dropped sharply, and the Australian dollar fell to pandemic-era lows. South Korea, Malaysia, and Pakistan announced diplomatic measures to seek tariff relief. Middle Eastern markets were also hit hard, further exacerbated by a steep drop in oil prices. President Trump defended the tariffs as necessary "medicine" to correct unfair trade imbalances and indicated no intent to reverse course. Despite global concern and economic volatility, Trump's administration claims over 50 countries are interested in trade negotiations. Markets are expected to remain volatile amid ongoing uncertainty over global trade relations.

Billionaire hedge fund manager and Trump supporter Bill Ackman has issued a stark warning about the economic consequences of President Trump's reciprocal tariffs, describing the potential fallout as an "economic nuclear winter." In a social media post on Sunday, Ackman urged Trump to immediately pause the tariffs to prevent a self-inflicted recession. He emphasized the need for a time-out to reform what he called an unfair global tariff system.

The sharp declines in Middle Eastern stock markets highlight the interconnectedness of global economies and the far-reaching impacts of trade policies and commodity price fluctuations. As trade tensions continue to escalate, the economic stability of energy-producing nations remains a critical concern.