Major equity markets across the Gulf closed lower on Tuesday, with Saudi Arabia's benchmark index dropping 0.4% as investor sentiment soured.
The sell-off was driven by a dual headwind: waning confidence in the progress of US-Iran diplomatic talks and a sharp rise in market expectations for Federal Reserve rate hikes.
3% on reports of significant progress in peace negotiations between Iran and the United States.
The retreat marks a reversal from Monday's mixed session, where Dubai's primary share index had risen 0.3% on reports of significant progress in peace negotiations between Iran and the United States.
That brief optimism has evaporated as geopolitical risks reasserted themselves, triggering a broad-based risk-off move that also saw Asian equity markets retreat earlier in the week.
Investors are now pricing in a more hawkish stance from the Federal Reserve, with rate-hike bets mounting amid persistent inflation concerns.
This shift in monetary policy expectations is weighing heavily on regional valuations, as higher borrowing costs threaten to dampen economic growth prospects in the Gulf Cooperation Council states.