Oil Crash Sends Aramco, Gulf Bonds and Stocks Reeling

(Bloomberg) -- The collapse in oil prices reverberated through Middle East markets for a second day, with Saudi Aramco plunging by the maximum allowed and yields on its bonds soaring.

Aramco fell as much as 10% before finishing 5.5% lower, helping drive the Tadawul All Share Index down 7.8%. Other major gauges in the Gulf tumbled, while Omani rial forwards jumped to a record high in the offshore market and Saudi riyal forwards rose fourfold.

The slump in Gulf assets came as oil registered its biggest drop since the Gulf War in 1991 following the breakdown of talks between OPEC and Russia in Vienna, which prompted Saudi Arabia to slash prices. Brent crude was trading at $34.73 a barrel as of 12:39 p.m. in London, with Goldman Sachs Group Inc. telling clients it could quickly dip into the $20s.

“The ability of oil-dependent nations to fund their respective fiscal programs this year are likely to be thrown into further doubt,” said Han Tan, a Kuala Lumpur-based market analyst at FXTM.

Snapshot of Gulf markets on Monday:

• Gauges in Dubai, Abu Dhabi and Qatar lost between 8.1% and 9.7%, extending a slump from Sunday.
• Kuwait’s stock exchange halted trading for the premier market for the second day after losing 10%.
• Emaar Properties, a bellwether for the real estate market in Dubai, extended a two-day drop to 18%, the most since 2009.
• Qatar National Bank, the biggest bank in the Middle East, ended 10% lower, the maximum allowed and the biggest drop in more than 14 years.
• Major banks in Riyadh, including Al Rajhi Bank, National Commercial Bank,and Banque Saudi, fell at least 7.4%.
• Dollar-denominated sovereign bonds of Saudi Arabia, Oman and Bahrain led declines in the region.
• Aramco’s bonds due in 2029 and 2049 had their biggest declines since they were issued in April last year.
• 12-month forwards on the dollar against the Omani rial almost tripled to 2,000 points in the offshore market, an all-time high. Dollar-Saudi riyal contracts that expire in 12 months rose four-fold to 183 points.

“Broadly, the outlook will remain decidedly negative as long as the price remains in the $30 per barrel range,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd. “More concretely, the countries where the fiscal breakeven is higher -- Bahrain and Oman -- will certainly suffer.”

Read more:

• Saudi Arabia’s Oil Crash Has No Quick End: Julian Lee
• Gulf Currency Pegs in Spotlight as Saudi, Omani Forwards Jump
• Oil Collapse Sparks Lowest Bond Yields in History: Markets Wrap
• Oil Crash Sends New Shock Through World Crippled by Virus
• On March 8: Arqaam Cuts Gulf Bank Outlook as It Cites ‘Perfect Storm’

--With assistance from Hanna Hoikkala.

To contact the reporters on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net;Netty Ismail in Dubai at nismail3@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Justin Carrigan, John Viljoen

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