WILL TRUMP'S GAZA PEACE PLAN LEAD TO A STOCK MARKET RALLY IN THE MIDDLE EAST?

US President Donald Trump's announcement of a Gaza peace plan has brought a new degree of certainty to markets in the Middle East, where conflict in the Palestinian enclave has clouded the region's economic outlook for two years.

Mr Trump, who is expected to visit the region this weekend, said in a Truth Social post on Wednesday night that the first phase of the plan includes the release of hostages held in Gaza and detainees in Israel, and that Israel will withdraw its troops to an agreed-upon line.

Hamas and Israel agreed on the first phase of the ceasefire on Wednesday night, and Israel's cabinet approved the framework in the early hours of Friday. The steps that follow − which include the disarmament of Hamas and the governance of Gaza − have yet to be agreed.

Saudi Arabia’s benchmark Tadawul Index rose as high as 1.5 per cent on Thursday before closing 0.21 per cent up. Abu Dhabi's exchange and the Qatar Stock Exchange showed minor gains upon market close.

Nigel Green, chief executive of the deVere Group, said the early moves in Middle Eastern markets show how markets behave when there is more geopolitical certainty.

“We’d expect the UAE, Saudi Arabia and Qatar to lead the charge, powered by their fiscal surpluses and sovereign wealth capital ready to be redeployed,” he said.

The peace plan comes as the Federal Reserve signals it will deliver further rate cuts this year, after lowering policy last month. Most of the central banks in the Gulf, which follow Fed decisions because of the dollar peg, are expected to mirror the US central bank's decisions.

“Layer a peace framework on top of that and you have the perfect cocktail for a risk rally,” Mr Green said.

However Rachel Ziemba, founder of geopolitical risk firm Ziemba Insights, argued the Gaza peace plan will have a minimal impact on Middle East markets.

“Gaza is important for strategic reasons, for [Gulf] relations with the US and Israel but there aren't a lot of financial flows at stake,” she said.

Oil prices also fell on Thursday with Brent, the global benchmark for crude, down 1.68 per cent to $60.98 per barrel as of 12.38am GST. West Texas Intermediate, which tracks US crude, fell 1.77 per cent to $61.44 a barrel.

While oil prices fell following the announcement of the peace plan, Ms Ziemba argued the US “maximum pressure” campaign on Iran, where Washington is trying to curtail Tehran's oil flows by more than 90 per cent, is likelier to have an impact on regional markets.

“We're already at a point where there's not a lot of risk premium in the energy markets. I don't expect there to be a major move there,” she said.

This comes as China's demand for oil is also slowing. Ms Ziemba said she believed the primary driver in oil markets will be Chinese demand and whether Beijing will continue to stockpile.

China, which imports large quantities of oil from the Middle East, was expected to hit peak oil demand in 2027, the International Energy Agency said in June.

AI still the game on Wall Street

Meanwhile, major indices on Wall Street retreated from their record-highs on Thursday following their gains in the previous section.

US market reaction on October 9, 2023 – the first day of trading after the deadly Hamas assault on Israel – ended in the green after major indices were under pressure earlier in the day due to the war. The Dow Jones closed nearly 200 points higher, while the S&P 500 and Nasdaq Composite both saw gains.

Peter Andersen, founder of Capital Andersen Management in Boston, anticipates the Gaza peace plan will have a negligible effect on US markets.

“Is the market reacting to a government shutdown?” he said.

Investors have so far brushed off their concerns over the US government shutdown, which began on October 1.

It is the latest episode in a turbulent year for markets, which dipped in April on Mr Trump's sweeping tariff announcements only to rebound after a series of announced trade deals, Federal Reserve rate cuts and the promised gains of artificial intelligence.

“The discussion of AI and capital expenditures seems to be driving that more than anything else, and if we're heading towards a bubble,” said Mr Andersen said.

“We're already risk-on, and certainly this news is not going to dampen that. It will marginally add to the enthusiasm that we have now.”

2025-10-10T11:01:33Z