TASI’s honeymoon ended abruptly yesterday as fears of a US-Iran escalation and a metals slump snapped the market’s month-long streak. The index shed 1.9% on the first trading day of February, the highest slump in around 10 months, reversing a trend that saw the market price in the opening of the kingdom to mass foreign investment.

The drop comes immediately after TASI’s best monthly gains since 2022, which saw the index jump 8.5% in January to close at 11.38k points and claw back some of the heavy losses it suffered last year. Heavyweights led the surge as Aramco gained 8% in January, while banks broadly outperformed as expectations of stronger liquidity and foreign inflows took hold.

Why it matters

The market spent January wagering on structural reform: The Capital Markets Authority scrapped the Qualified Foreign Investor regime and welcomed all categories of non-Saudi investors as of yesterday, officially removing the USD 500 mn AUM barrier for foreign investors.

The rally was welcome news for the new class of investors as well as companies looking to IPO this year, but reality bit back yesterday. The optimism collided with geopolitical risk as the Trump administration’s deployment of forces and Tehran’s vow to retaliate spooked investors.

A sharp global slump in materials prices also reversed the bullish sentiment on metals, leading Amak and Maaden to become the biggest casualties of the sell-off, shortly after leading TASI’s gains in January.

The mining volatility could be a boon for other sectors: Hussein Al Raqib of Zad Consulting suggests the banking sector will emerge as the primary beneficiary of the new foreign inflows. With robust solvency and high profitability, banks like Al Rajhi and Saudi National are positioned as “safe havens” against the current volatility, Al Raqib told Asharq Business.

What’s next?

The bear case: Global capital was heading into 2026 with a risk-off sentiment toward the region. Major fund managers told Bloomberg earlier that despite the QFI opening, softer oil prices and the lack of immediate earnings catalysts are keeping them on the sidelines.

The removal of the QFI rules removes friction, but doesn’t create demand on its own, Aleqtisaih’s Ahmed Al Rasheed told Asharq Business. Foreign investors will now wait for 4Q earnings and clear fundamentals before deploying capital, Al Rasheed says.

The bull case: Kamco Invest’s Junaid Ansari argues the market is “oversold” and primed for a rebound, citing robust banking sector lending and earnings growth that ignore the geopolitical noise.

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