Saudi Arabia's benchmark index dropped 0.9% on Tuesday, leading a broad decline across major Gulf stock markets as investors adopted a cautious stance ahead of key geopolitical and monetary policy developments.
The sell-off reflected a risk-off sentiment driven by the convergence of two major uncertainties: the outcome of ongoing peace talks between the United States and Iran, and the upcoming policy decision by the US Federal Reserve.
The regional downturn was not isolated to Saudi Arabia, with most Gulf bourses closing in the red.
The simultaneous pressure from geopolitical risk and macroeconomic policy expectations has created a challenging environment for regional equities.
Investors are particularly sensitive to any signals that might indicate a shift in the diplomatic landscape or a change in the US interest rate trajectory, both of which have significant implications for capital flows into emerging markets.
This latest move follows a period of subdued trading activity across the Gulf, where indices showed little movement as markets assessed the progress of diplomatic efforts between Washington and Tehran.