Gulf equity markets closed lower on Wednesday, with Dubai's primary share index declining 1.5%.
The sell-off extended losses from Tuesday, when the same index fell 0.6% and Saudi Arabia's benchmark dropped 0.4%, as investor sentiment soured on the region's geopolitical outlook.
The decline followed remarks from U.S. President Donald Trump indicating that the memorandum of understanding aimed at ending the conflict with Iran had effectively stalled.
The loss of diplomatic momentum removed a key support for risk assets, reversing the gains seen earlier in the week when markets had rallied on hopes of a breakthrough in US-Iran talks.
Shipping risks in the Strait of Hormuz remain a persistent headwind for regional equities.
Iran has previously warned of forceful responses to tankers deviating from approved routes, while Oman's diplomatic opacity on Hormuz fees has deepened uncertainty for trade routes. This dual pressure of geopolitical tension and logistical risk continues to weigh on investor confidence in the Gulf.
Traders are now focused on whether any new diplomatic channels can be opened to de-escalate tensions.
Without a clear path to a ceasefire, equity markets in the region are likely to remain volatile, with energy and shipping stocks particularly exposed to shifts in the geopolitical narrative.