Mideast Stocks: Gulf Markets Fall As Rate Cut Optimism Fades; Saudi Index Near Two-Year Low

Major Gulf stock markets gave up early gains to close down on Monday, as investor optimism over a U.S. rate cut and higher oil prices gave way to concerns about excess crude supplies.

Saudi Arabia's benchmark index fell 0.9% to its lowest level in nearly two years, pressured by broad-based sectoral losses. Al Rajhi Bank, the world's largest Islamic lender, and oil giant Saudi Aramco both fell 0.9%. Elsewhere, Theeb Rent a Car dropped more than 2% as its shares traded ex-dividend.

Dubai's main share index also retreated 0.9%, with nearly all sectors closing in negative territory. Emirates NBD led the losses, falling almost 3%. Emirates Integrated Telecommunications Company, better known as du, declined 3% after it launched a secondary share sale as one of its main investors, a Mubadala subsidiary, trims its holding. The transaction could generate about AED 3.39 billion ($923 million), with du receiving no proceeds from the sale.

Abu Dhabi's index edged down 0.7%. Abu Dhabi Commercial Bank tumbled 7.5% - its steepest fall in more than three years - after the UAE's third-largest bank by assets proposed a rights issue priced 30% below the last close, aiming to raise 6.1 billion dirhams ($1.66 billion).

Qatar stock index declined 0.6%, hit by a 0.7% fall in Qatar Islamic Bank . 

The U.S. Federal Reserve's expected rate cut next week - driven by weaker U.S. job growth and a rise in unemployment to a near four-year high of 4.3% - initially appeared supportive for sentiment.

However, investor optimism waned during the session as traders had already fully priced in a 25-basis point (bp) cut, with just an 8% chance of a larger 50-bp move, according to the CME FedWatch tool.

The Fed's stance carries heavy clout in the Gulf, where most currencies are pegged to the U.S. dollar, anchoring regional monetary policy.

Outside the Gulf, Egypt's blue-chip index rebounded 0.4%, supported by a 1.9% gain in Commercial International Bank.

SAUDI ARABIA dipped 0.9% to 10,497

ABU DHABI dropped 0.7% to 9,960

DUBAI fell 0.9% to 5,935

QATAR eased 0.1% to 11,125

EGYPT advanced 0.4% to 34,602

BAHRAIN added 0.1% to 1,938

OMAN slipped 0.9% to 5,078

KUWAIT jumped 2% to 9,266