RIYADH: Gulf stock markets fell 1.3 percent in May, diverging sharply from a global equity rally fueled by artificial intelligence optimism, as the third month of disruption in the Strait of Hormuz weighed on investor sentiment and oil market volatility.
According to Kamco Invest’s monthly report, while the MSCI GCC Index declined 1.3 percent over the month, the MSCI World Index surged 5 percent, extending a record 15 percent-plus gain over the past two months driven by AI infrastructure stocks.
The Gulf’s underperformance comes as investors continue to assess the economic fallout from the ongoing regional conflict, which has disrupted shipping routes, heightened uncertainty in energy markets and raised concerns about growth prospects across the region.
“The critical waterway remained closed as the war dragged on for the third consecutive month affecting crude oil volatility, although there were some positive statements made toward the end of last month,” the report added.
Oman recorded the steepest decline in the region, with the MSX 30 Index falling 7.3 percent in its first monthly loss after 10 consecutive months of gains. Despite the drop, the market remained up 32.2 percent year to date.
Saudi Arabia’s TASI declined 1 percent and Abu Dhabi’s FTSE ADX Index fell 0.8 percent, while Dubai’s DFM Index was nearly flat, edging down 0.1 percent. Qatar and Bahrain bucked the regional trend, posting gains of 0.6 percent and 0.4 percent, respectively.
Across the region, defensive and AI-adjacent sectors showed strength while health care and materials bore the brunt of the selloff. Saudi Arabia’s Software and Services index jumped 11.1 percent, and its Food and Beverages sector rose 8.0 percent, while Capital Goods tumbled 7.8 percent and Healthcare Equipment fell 6.6 percent.
At the GCC level, healthcare was the worst-performing sector, falling 5.4 percent, followed by materials, which declined 4.4 percent.
The regional conflict is also prompting a reassessment of economic growth prospects. The World Bank cut its 2026 gross domestic product growth forecast for the UAE to 2.4 percent from 4.7 percent projected in January, attributing the downgrade to the ongoing conflict and reduced energy revenues from Hormuz disruption.
For Oman, the lender projected 2.4 percent growth, well below the International Monetary Fund’s 3.5 percent forecast, citing indirect pressure from higher shipping costs and longer transit times, though it expects a recovery to 3 percent in 2027.
Bahrain received a measure of reassurance from S&P Global Ratings, which affirmed the Kingdom’s B/B sovereign credit rating with a stable outlook, noting that continued GCC support should offset the effects of regional disruption.
