Why did Gulf stock markets plunge following the oil price war?

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Gulf Stock Markets Plunge Amidst Oil Price War and Failed Output Deal

Gulf stock markets experienced significant declines as a result of a price war that sent oil prices plummeting. This downturn occurred after major crude producers failed to reach an agreement on output cuts, a development that heavily impacts the economies of these energy-rich nations. The six-nation Gulf Cooperation Council (GCC) region relies heavily on oil exports, which generate between 70 and 90 per cent of public revenues, making their stock markets particularly sensitive to fluctuations in crude prices.
Oil Price Collapse Triggers Market Sell-off

The catalyst for the stock market plunge was the dramatic crash in oil prices, with benchmark Brent crude diving to US$36 a barrel. This sharp decline followed Saudi Arabia's decision to launch a price war with the biggest production cuts in two decades. The move came after a crucial meeting on Friday where the Organization of the Petroleum Exporting Countries (Opec) and other key producers could not agree on deeper output reductions aimed at counteracting the economic impact of the coronavirus. Russia's refusal to agree to tighter supply measures was a key factor in the breakdown of the Opec+ talks.
Major Regional Exchanges Suffer Steep Losses

All seven Gulf Arab stock exchanges were in negative territory for the second consecutive day, collectively shedding hundreds of billions of dollars in market value. The Saudi market, the largest in the region, saw a substantial drop of 7.8 per cent. Energy giant Saudi Aramco experienced a 10 per cent plunge, ultimately losing approximately US$250 billion of its value over two days, bringing its market capitalization to US$1.51 trillion. Other exchanges also witnessed severe declines, with Dubai Financial Market falling 8.3 per cent to its lowest level in seven years, prompting trading suspensions in many leading stocks due to the maximum daily limit of 10 per cent being reached.
Widespread Impact Across Gulf Exchanges

The downturn was not confined to Saudi Arabia and Dubai. The Abu Dhabi Securities Exchange shed 8.1 per cent, reaching a four-year low, while the Qatar Stock Exchange declined by 9.7 per cent. Kuwait's Premier index tumbled by 10.3 per cent, leading to trading suspensions for the second day in a row, and its All-Shares Index lost 8.6 per cent. Smaller markets in Oman and Bahrain also dipped, by 5.6 per cent and 5.8 per cent respectively. These widespread losses underscore the interconnectedness of oil prices and the financial health of the Gulf states.

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Why did Gulf stock markets plunge following the oil price war?

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