Executive Summary
GCC markets broke their losing streak in June, with the S&P GCC index rising 3% after four consecutive months of declines. Volatility remained on the higher side due to the Iran-Israel conflict. Kuwait led gains with a 4.2% rise, followed by Dubai at 4.1%, while Saudi Arabia saw a modest 1.6% uptick. The impact of Iran-Isreal conflict on the markets was short-lived, similar to many of the past events of geopolitical tensions globally. GCC markets rebounded sharply—rising by 2.9% on 24th June 2025—immediately after a ceasefire was announced and extending the gains to 5.3% in five trading days after the announcement. Geopolitical conflicts can generally be classified into two categories: (a) high-frequency, low-impact events and (b) low-frequency, high-impact events. Most conflicts fall into the first bucket. Market impact of these events in short lived because investors look through these events and are reassured by the region’s underlying economic resilience and institutional stability. However, this pattern need not persist always. Over the past decade, the MSCI GCC index outperformed the MSCI EM index by an average of 1.47% annually; this figure rose to 5.22% over the past five years. Although it is hard to isolate the alpha that can be attributed to such geopolitical events, an educated guess is that that at least half of it—around 50%—can be linked to the perceived risks.
