Gulf Stock Markets Rise on U.S. Rate Cut Hopes as Investors Eye Federal Reserve Signals

Most major stock markets in the Gulf region ended Sunday on a positive note after U.S. Federal Reserve Chair Jerome Powell hinted at the possibility of a September interest rate cut during his widely followed address at the Jackson Hole Symposium. The prospect of a rate reduction has fueled optimism across global and regional financial markets, providing a boost to investor sentiment in the Middle East.

Powell’s Remarks Spark Investor Optimism

On Friday, Powell acknowledged that while inflation risks remain, the U.S. labor market is showing signs of weakness. This dual concern has opened the door for a potential policy shift. Investors quickly reacted, increasing their bets on a September rate cut from 75% to nearly 90% following his comments. Although Powell emphasized that no decision has been finalized, markets have interpreted the remarks as a strong signal that the U.S. Federal Reserve is leaning toward monetary easing.

For Gulf economies, such developments are especially important. Since most regional currencies are pegged to the U.S. dollar, any shift in American monetary policy directly influences capital flows, liquidity, and investment trends in Gulf Cooperation Council (GCC) markets.

Saudi Arabia: Gains Led by Aramco and ACWA Power

The Saudi benchmark index (TASI) rose 0.4% to close at 10,905 points. Energy giant Saudi Aramco played a significant role in the rally, advancing by 0.7%. As the world’s largest oil exporter, Aramco often sets the tone for the Saudi exchange due to its heavy weighting in the index.

Another major contributor was ACWA Power Company, which climbed 1.6%. The company recently secured financing for two large-scale combined cycle gas turbine (CCGT) power plants in Saudi Arabia with a combined capacity of 3,600 megawatts. With a 35% effective shareholding in each of these projects, ACWA Power is set to play a pivotal role in expanding the Kingdom’s energy infrastructure and diversifying its power generation capacity.

Qatar: Market Slips on Banking Losses

In contrast, Qatar’s main index (QSI) slipped by 0.2% to finish at 11,323 points. The downturn was largely driven by a 1% decline in Qatar National Bank (QNB), the Gulf region’s largest lender. Despite the global optimism, pressure on the banking sector weighed heavily on the Qatari market, limiting overall performance.

Egypt: Eastern Company Lifts Market Higher

Outside the Gulf, Egypt’s blue-chip index (EGX30) posted a gain of 0.5%, closing at 35,812 points. The rally was spearheaded by Eastern Company, the country’s tobacco monopoly, which surged 3.7%. The company continues to benefit from its market dominance and resilient demand, helping offset broader concerns about inflationary pressures in Egypt’s economy.

Broader Gulf Market Performance

Apart from Saudi Arabia and Qatar, other Gulf markets also reflected mixed trends:

• Bahrain (BAX): rose 0.2% to 1,935 points.
• Oman (MSX30): gained 0.9% to reach 5,005 points, showing strong momentum.
• Kuwait (BKP): fell 0.3% to 9,254 points, dragged down by financial sector losses.

These movements highlight the varied investor responses across the region. Markets closely tied to energy and infrastructure, such as Saudi Arabia and Oman, recorded gains, while financial-sector heavy markets like Qatar and Kuwait faced headwinds.

Why U.S. Rate Cuts Matter to the Gulf

U.S. monetary policy plays an outsized role in shaping Gulf financial markets. With most GCC currencies pegged to the U.S. dollar, interest rate moves by the Federal Reserve directly affect borrowing costs, liquidity conditions, and investment strategies in the region.

A potential rate cut in September could lower funding costs, stimulate corporate borrowing, and support economic growth in the Gulf. At the same time, it could provide a favorable backdrop for government-backed infrastructure projects and private-sector expansion, particularly in sectors like energy, construction, and technology.

Investor Outlook

The positive performance of most Gulf markets underscores the region’s sensitivity to global economic signals. With oil prices stabilizing and monetary easing on the horizon, investor sentiment is turning cautiously optimistic. However, uncertainties around inflation and geopolitical risks remain key factors to watch.

For now, Saudi Arabia and Egypt appear to be the strongest performers, benefiting from sector-specific gains in energy and consumer industries. Meanwhile, Qatar and Kuwait may need stronger catalysts to reverse recent declines in their financial sectors.

Final Thoughts

As Jerome Powell’s comments fuel expectations of a September interest rate cut, Gulf markets are reflecting renewed investor confidence. While not all regional exchanges ended in positive territory, the broader trend suggests that monetary easing in the U.S. could act as a tailwind for Gulf economies in the months ahead.

With projects like ACWA Power’s new plants in Saudi Arabia and Eastern Company’s dominance in Egypt, investors are finding opportunities that align with both global policy shifts and domestic growth drivers. The coming weeks will be crucial as markets await confirmation of the Fed’s next move.