Gulf Countries: Analysis of the Economy and Financial Markets

The Gulf countries, or the Gulf Cooperation Council (GCC) countries, include Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain. The Gulf Union was established in 1981 to enhance economic, political, and security cooperation among these countries. The Gulf represents a partially unified geographical market, with its members linked by strong trade and investment relations, particularly with Saudi Arabia, which holds the largest regional economy and the largest stock market. In the Saudi financial context, the Gulf countries are a strategic partner, as trade integration reflects on capital flows and the development of regulatory policies. These links have led to increased joint listings in the Saudi stock market, enhanced liquidity, and support for joint infrastructure projects. Additionally, economic developments in any of the Gulf countries directly affect investor sentiment and the performance of the Saudi stock market, as they impact oil prices, cash flows, and sovereign investments.

The population of the Gulf Cooperation Council countries is approximately 57 to 60 million, with Saudi Arabia leading at around 36 million, followed by the UAE with about 10 million, Qatar with approximately 3 million, Kuwait and Oman each with about 4.5 million, and Bahrain with 1.7 million. Economically, most Gulf countries primarily rely on oil and gas as the main source of government revenue. Saudi Arabia alone holds 18% of the world's oil reserves and is the largest oil exporter. Additionally, Gulf countries enjoy substantial financial reserves through their sovereign wealth funds, injecting significant liquidity into the markets and enhancing financial stability. In 2024, high oil prices (above $100 per barrel) contributed to significant financial surpluses, enabling governments to increase spending on national development projects, such as Saudi Arabia's Vision 2030 and the UAE's national plan. The trend towards economic diversification continues, with increasing investments in technology, renewable energy, tourism, and financial services.

Energy (oil and gas) remains the most economically significant sector in the Gulf countries, but it is no longer the only sector. In Saudi Arabia, there are massive investments in petrochemicals (such as SABIC), renewable energy, and tourism (NEOM, Qiddiya). The UAE excels in technology, financial services, and global tourism through projects like Dubai Mall and Expo Dubai. Qatar focuses on liquefied natural gas and infrastructure projects, benefiting from the legacy of the 2022 World Cup. Kuwait is moving towards developing banking services and industry, while Oman focuses on industry and the Duqm port, and Bahrain relies on the financial services sector. This sectoral diversity supports sustainable economic growth and mitigates the impact of oil price fluctuations. Gulf countries are also seeking to stimulate investments in new sectors such as renewable energy, artificial intelligence, and smart infrastructure, enhancing the attractiveness of their markets for investors.

In 2024, Gulf countries witnessed positive economic growth rates supported by high energy prices. Saudi Arabia recorded growth of nearly 3%, the UAE between 4-5%, and Qatar and Kuwait around 3-4%, while Oman achieved growth of about 2%. Inflation remained relatively low (2-3%) due to government oversight and support, despite a temporary rise in some countries due to energy prices. Government debt in most Gulf countries is relatively low compared to other oil-producing nations, and these countries often achieve financial surpluses or slight deficits. These indicators reflect strong financial stability and provide a solid foundation for attracting investments and enhancing sustainable development projects, especially with substantial sovereign reserves and stringent financial governance.

Saudi Arabia has the largest Gulf stock market, with a market capitalization exceeding 45 trillion riyals and more than 2,000 listed companies by the end of 2024. The UAE follows with a market capitalization for the Dubai and Abu Dhabi exchanges ranging between $3-4 trillion. Kuwait, Qatar, Bahrain, and Oman have market capitalizations in the hundreds of billions of dollars. The main indices are: TASI (Saudi Arabia), DFM (Dubai), ADX (Abu Dhabi), Qatar Index, Kuwait Index, and the indices of Bahrain and Oman. In 2024, the Dubai index was the best performer (up 27%), followed by the Kuwait index (+5%). The Saudi market showed stability with slight fluctuations, while some other markets experienced limited declines. As we enter 2025, some Gulf markets continued their positive performance, supported by increased liquidity and international investor interest.

Gulf markets experienced an increase in average daily trading values during 2024-2025, driven by fluctuations in oil prices and heightened global interest in the region following the listing of major companies like Aramco. Supportive monetary policies (such as interest rate cuts in Saudi Arabia, the UAE, and Kuwait) enhanced liquidity and facilitated borrowing and investment. Additionally, Gulf sovereign wealth funds contributed to increased liquidity by injecting substantial investments into local and regional markets. The listing of Gulf companies on the Saudi Tadawul contributed to raising trading volumes and attracting new investors. All these factors have made Gulf markets more active and attractive to both local and global investors in recent times.

Gulf markets are witnessing significant efforts to enhance financial and regulatory integration. Although each country maintains an independent regulatory authority, there are joint initiatives to simplify dual listing procedures, such as facilitating the listing of Gulf companies on the Saudi Tadawul. The Saudi Capital Market Authority has made legislative adjustments to encourage foreign (especially Gulf) companies to list, while the UAE has eased dual listing procedures in the Dubai and Abu Dhabi exchanges. Additionally, the Saudi Tadawul Group has launched strategic partnerships with the Dubai Energy Exchange to establish a unified Gulf commodity market, along with developing financial infrastructure projects linking Gulf markets. Initiatives to connect Gulf payment and settlement systems are also ongoing, although not yet complete. These reforms are driving towards a more interconnected and integrated Gulf market in the coming years.

Gulf countries are distinguished as some of the largest exporters of oil and gas globally. Saudi Arabia led daily oil production in 2024 (10-11 million barrels) and holds the second-largest proven reserves worldwide. The UAE, Qatar, and Kuwait also possess substantial reserves, with Qatar being the largest exporter of liquefied natural gas globally. This dominance makes Gulf economies and markets sensitive to changes in energy prices. In addition to oil, the Gulf is expanding into renewable energy projects, such as solar and wind power plants in Saudi Arabia and the UAE. Cooperation on energy projects among Gulf countries includes gas and electricity pipelines, enhancing economic integration and reducing reliance on single energy sources.

The banking sector in the Gulf represents one of the pillars of the economy, with major banks such as Qatar National Bank (QNB), National Bank of Kuwait (NBK), and Al Rajhi and National Bank in Saudi Arabia. These banks are expanding regionally and competing in Islamic finance and modern financial services. Dubai and Abu Dhabi have become regional financial hubs, increasing competition to attract international capital. Cooperation among Gulf and Saudi banks in project financing and joint investment is rapidly evolving. Additionally, Islamic finance is a growing sector in the region, with banks like Alinma Bank and their Gulf counterparts offering Sharia-compliant products, attracting a wide range of investors.

In recent years, there has been increased interest from Gulf companies in listing on the Saudi financial market. A recent example is the National Bank of Kuwait (NBK), which applied for listing on Tadawul in 2024. The GFH Financial Group from Bahrain is also moving towards dual listing, with expectations of increasing its market value. These listings reflect the attractiveness of the Saudi market as the largest in the region and support the diversification of the investor base and increased liquidity. Gulf energy and petrochemical companies (such as Aramco, ADNOC, QP, KPC) are also competing for market shares regionally and globally, along with telecommunications, tourism, and manufacturing companies that contribute to activating Gulf economic integration.

Gulf markets have witnessed several significant developments in 2024-2025. Among the most notable are: the Saudi Tadawul Group acquiring a strategic stake in the Dubai Energy Exchange to establish a regional commodity market, and the cooperation of UAE exchanges with the Saudi market to develop technical and legislative infrastructure. Saudi Arabia led Gulf IPOs, with companies like NBK and GFH moving towards listing on Tadawul. Some Gulf countries launched international bond programs to attract foreign capital amid low-interest policies. Markets have adopted modern financial technologies such as high-frequency trading and local currency exchange-traded funds, enhancing the market's appeal to youth and new investors.

Gulf countries are collaborating on massive economic projects, the most prominent of which include gas pipeline projects, smart cities (NEOM in Saudi Arabia, Lusail in Qatar), renewable energy projects, transport and port infrastructure (Duqm Port in Oman), and integration in banking payment systems. These projects support economic integration and provide significant investment opportunities in industrial, real estate, and tourism sectors. Additionally, diversification plans such as Saudi Arabia's Vision 2030 and the UAE's national strategy add further momentum for investment in non-oil sectors, including technology, financial services, and tourism, increasing the region's attractiveness to local and international investors.

Despite the strength of Gulf markets, the region faces challenges such as reliance on oil, the need to accelerate economic diversification, and keeping pace with global technological transformations. Geopolitical tensions and volatile energy prices remain influential factors in financial markets. Nevertheless, regulatory reforms, renewable energy projects, and accelerating financial integration open promising future prospects. Continued development of financial infrastructure, enhancing transparency, and adopting modern technologies will strengthen the Gulf's position as an emerging market with global appeal. Joint listings and activating financial linkage initiatives between markets are expected to support the sustainability of economic and financial growth in Gulf countries in the coming years.