Middle East equity markets showed muted reactions to the U.S.-Israeli military campaign against Iran, with J.P. Morgan noting limited risks already priced into regional assets. Saudi Arabia’s Tadawul All Share Index rose 0.6%, building on Monday’s 0.13% gain, while Qatar’s QE Index fell 0.7% after a deeper 4.3% decline Monday. UAE markets remained closed domestically but saw U.S.-listed shares drop 3.5% pre-market. Brent crude surged 8.5% to $84.34 a barrel, aligning with J.P. Morgan’s forecast of $80–$85 amid potential supply disruptions.

J.P. Morgan attributed sharper declines in Greek banks—down 7% and 6% respectively—to overcrowded positioning rather than direct conflict exposure. Saudi and Qatari banks fell 3.9% and 4.1%, respectively, with Elm Company plunging 11.9%. The disparity reflects foreign ownership differences: UAE markets average 23.82% foreign stakes versus 11.56% for Saudi and 17.49% for Qatari markets. Analysts warned that sustained fighting could push Brent to $100–$120 if lasting beyond three weeks, though oil infrastructure remains intact so far.

Greek banks’ outsized drops highlight investor concerns about cascading economic impacts, despite no direct regional exposure. J.P. Morgan’s base case anticipates U.S. military victory within two to four weeks, contingent on avoiding ground troop deployments. Current Strait of Hormuz transit disruptions—export flows at 4 million barrels/day versus typical 16 mbd—underscore fragility, with bypass pipelines diverting only 3.3 mbd. Gulf producers face potential shutdowns after 25 days of full Hormuz blockage.

The conflict’s economic ripple effects remain concentrated on energy markets, with equity volatility reflecting broader geopolitical uncertainty. While MENA stocks show resilience, prolonged disruptions could reshape regional investment dynamics and global energy pricing.