Tadawul’s benchmark index TASI slid 2.18% to close at 10.48k points yesterday, recovering from a low of 10.19k during the day as investors actively priced in geopolitical risks. All sectors closed in the red, except for energy and F&B.

Elsewhere in the region: Egypt’s EGX 30 fell 2.5% to 47.98k yesterday, after dropping as much as 5.6% at the open. Markets in the UAE will extend their weekend by two days, while Kuwait suspended trading amid heightened volatility. Sico Capital Group’s research head Chiro Ghosh told us he expects some weakness when those markets reopen.

“The market added a higher risk premium after the recent escalation, reflecting concerns around energy stability, trade routes, and capital flows. The sharp decline and break of a key support level suggest a broader reset in risk appetite rather than simple profit-taking,” Sarah Alyasiri, financial markets analyst at CF Trade, tells EnterpriseAM.

The sell-off isn’t hitting all sectors equally. Alyasiri added that the pressure is concentrated on cyclicals — banks and basic materials — which are highly sensitive to foreign flows and global growth expectations. Ghosh notes that while the GCC tourism industry had a positive outlook for 2026, particularly with the anticipated GCC-wide visa, an escalation of the conflict may negatively impact the sector, along with real estate, aviation, and telecoms.

Energy is anchoring the index. Higher shipping and ins. costs are baking a risk premium into oil prices, which is supporting energy stocks — particularly Aramco, which closed up 3.4% — given their massive index weighting. Ghosh expects a further surge in oil prices when global markets open today as investors closely monitor the status of the Strait of Hormuz.

While the headline is red, the underlying movement is a rotation into safe havens. Alyasiri notes that fund managers are shifting toward defensive sectors like ins. and healthcare, while Ghosh sees the smart play is in moving toward lower beta names — including utilities, consumer, and high-dividend stocks — until there is a clear de-escalation.

What’s next: The trajectory depends on whether we see actual supply or shipping disruptions. “If risks remain contained, this pullback could become a selective [entry point],” Alyasiri says. However, if tensions persist, expect a wider sector divergence: energy and defensives will continue to outperform, while cyclicals remain under heavy pressure.

We’re keeping a close eye on oil prices

Pundits are still suggesting there’s a risk that oil rockets past USD 100 / bbl as Iran looks to choke the flow of crude out of the Gulf. Iran’s Tasnim News Agency claimed that the Strait of Hormuz is “effectively” closed and some ships reported receiving a radio broadcast on Saturday — reportedly from the Iranian navy — instructing them to leave the waterway as passage is banned.

Brent crude is at USD 75 this morning even after three ships were struck in the region yesterday— the first reported maritime attacks of the conflict so far. Attacks have so far been limited to the Arabian Gulf, with the Houthis yet to restart attacks on passing vessels in the Bab El Mandeb strait leading to the Suez Canal.

Oil tankers seem to have stopped moving through Hormuz, with roughly 240 vessels stopping near the chokepoint — most around Iran’s Bandar Abbas port, according to S&P Global. Around 130 of those ships were carrying cargo, but none were loaded with crude.

You can pump it out of the ground, but can you get it to market? While some think a pledge by Opec+ to boost output by as much as 206k bbl / d starting next month could offer relief, there’s a big catch: the majority of the group’s output comes from nations that are almost entirely reliant on the Hormuz Strait to deliver to the global market. “In such a scenario, the constraint is not upstream supply capacity but export routes and maritime transit,” Rystad Energy’s Jorge Leon tells EnterpriseAM.

“The cost of [covering] ships, containers, and crews, in addition to the refusal of some international ins. companies to [cover] war risks, will put pressure on global trade in the coming period,” former Suez Canal Authority chairman and Suez Chamber of Shipping head Abdel Qader Gaballah told EnterpriseAM.

Ins. premiums are lurching upward: A ship with USD 100 mn worth of goods, which used to pay roughly USD 250k per voyage, will now need to cough up USD 375k, the Financial Times reports.

Riyadh emerges as a travel hub amid airway closure

The relative calm in Riyadh helped it emerge as an exit point for those stranded in the Gulf, as King Khalid airport remains largely operational despite airspace closures. High-net-worth individuals, senior executives, and their families are reportedly driving from Dubai to Riyadh and boarding private planes for as much as USD 350k a trip to get out of the region or simply make business trips.

Civilian traffic closures continue for the airspaces of Iran, Iraq, Israel, Kuwait, Qatar, Syria, and Bahrain. As of yesterday, over 3.4k flights have been canceled across seven Middle Eastern airports.

Our budget airlines Flynas and Flyadeal have officially suspended several international routes until 3 March, joining an earlier suspension by Saudia. Major regional carriers, including Emirates, Qatar Airways, and Etihad, have suspended all services, with many groundings expected to last until at least this afternoon. The disruption extends to dozens of other airlines such as Turkish Airlines, Oman Air, and Egyptair, which have canceled routes to affected Gulf and Levant destinations.

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