Markaz: Kuwait equities outperform GCC peers, supported by resilient bank earnings

Kuwait Financial Centre “Markaz” stated in its Monthly Market Review that Kuwait markets broke their three-month losing streak, edging higher on strong corporate earnings, even as most GCC markets declined during the month. Kuwait’s All-Share Price Index advanced by 0.6%, driven by a 1.5% gain in the Premier Market Index. The banking stocks were the key driver of market performance, posting a 3.1% gain during the month, buoyed by resilient corporate earnings. National Bank of Kuwait and Kuwait Finance House gained 6.5% and 2.3%, respectively, supported by strong H1 2026 earnings. The net profits of NBK and KFH increased by 3.0% y/y and 6.1% y/y in H1 2026 despite regional geopolitical challenges and the subsequent economic pressure. Among Premier market stocks, Trolley General Trading Company advanced 7.5% during the month after delivering strong Q2 earnings, with revenue growth driven by higher store productivity, network expansion, and resilient consumer demand.

In a key economic policy move, the Kuwait Fund for Arab Economic Development launched a USD 100 million Emergency Response Fund to strengthen crisis preparedness and enhance resilience against future economic shocks.  Blackstone, KKR, and Brookfield agreed to acquire a 49% stake in a joint venture with Kuwait Petroleum Corporation (KPC), marking Kuwait's largest-ever foreign investment. The $16 billion deal supports KPC's capital expenditure plans and its goal of expanding crude production capacity to 4 million bpd by 2035. The Central Bank of Kuwait kept its key benchmark discount rate unchanged at 3.5% in July following the U.S Fed’s decision to hold rates steady amid persistent price pressures.  Kuwait's real GDP contracted by 4.6% y/y in Q1 2026, weighed down by the 12.5% y/y decline in oil GDP amid disruptions in oil production and exports due to the geopolitical tensions in the Middle East. Kuwait's final fiscal accounts for FY2025/26 showed the budget deficit widening sharply to KD 7.1 billion (around 15% of GDP), from KD 1.1 billion in the previous year. The deficit was the largest since the pandemic-hit FY2020/21 and exceeded the government's budget estimate by approximately KD 800 million. Kuwait issued a $6 billion three-tranche sovereign bond —its first since October 2025. The offering was oversubscribed more than three times, reflecting strong investor confidence despite heightened regional geopolitical tensions.

GCC equities were broadly negative in July, with the S&P GCC Composite Index declining 1.5%. Renewed geopolitical tensions in the Middle East, including attacks on key infrastructure facilities of Kuwait and Bahrain, dented investor sentiment. A good start to corporate earnings season helped limit market losses. Saudi Arabia’s Tadawul Index fell 1.9%, dragged down by the negative performance of major blue-chip stocks. The share price of Al Rajhi Bank declined 5.1% after issuing a more cautious outlook on loan growth and margins despite a 14% y/y growth in Q2 2026 net profits. Dubai’s equity index retreated 2.7% as re-escalation in geopolitical tensions triggered broad-based selloffs in real estate stocks amid concerns over foreign demand. Abu Dhabi equities ended positive in July (+1.1%) due to resilient earnings that lifted banking stocks. Share prices of FAB and ADCB rose 12.4% and 3.6%, respectively, during the month.

GCC central banks kept policy rates unchanged in tandem with the U.S Fed’s decision to hold rates, maintaining monetary policy alignment under the US dollar peg. S&P Global Ratings projected weaker GCC corporate profitability in 2026, citing higher logistics costs and delayed investment due to the geopolitical uncertainty that is expected to weigh on capital expenditure and debt issuance. The U.S has imposed a 12.5% tariff rate on imports from GCC economies to prevent goods produced with forced labor from entering its markets. Fitch affirmed its A+ sovereign rating for Saudi Arabia with a stable outlook. In the UAE, domestic credit growth accelerated to 15.0% y/y in May, the fastest pace in over a decade, supported by 10.1% growth in corporate lending and 13.3% growth in personal credit.

Global and U.S equities were muted during the month as the AI-driven rally lost momentum, triggering a broad sell-off in technology stocks. Mounting concerns over stretched technology valuations and the sustainability of AI-related capital spending prompted investors to aggressively reduce exposure to tech stocks. The MSCI World Index edged up 0.5% for the month while the S&P 500 ended flat. However, the tech-heavy Nasdaq Composite plunged 3.2%, exhibiting a deeper decline. The U.S. Fed left policy rates unchanged in the 3.5%-3.75 % range at the July FOMC meeting, but struck a firmer hawkish tone, with three FOMC members favoring a rate hike in July. Fed Chair Kevin Warsh offered little forward guidance, reiterating that policy would remain strictly data-dependent and that rates could still move higher if inflation pressures persisted. Selling pressure in technology and semiconductor stocks was even more pronounced across emerging markets as China's progress in domestic chipmaking heightened competitive concerns, while elevated valuations in markets like Korea and Taiwan accelerated profit-taking. The MSCI Emerging Markets Index fell 3.3%, with South Korea and Taiwan equity indices declining 22.2% and 6.5% respectively.

The 10-year U.S. Treasury yield rose 31 bps during the month to close at 4.75%, driven by a spike in oil prices following renewed U.S.-Iran tensions and continued uncertainty over the Federal Reserve's interest rate trajectory. Brent crude oil prices surged 23.6% over the month to close at USD 90.1/bbl., as reports of fresh military exchanges between the U.S and Iran and continued threats over control of the Strait of Hormuz revived fears of supply disruption, pushing the geopolitical risk premium sharply higher. The disruptions to alternative shipping routes, including the Bab el-Mandeb Strait and the Red Sea, due to attacks by Iran-backed groups further supported oil prices.


As we move into August 2026, investors will closely monitor economic data releases to set expectations on the future interest rate path, as the Fed has disoriented itself from providing future guidance. The resurgence of geopolitical risks continues to drag regional equity and global commodity markets. Global market performance could hinge on market sentiments surrounding technology and semiconductor companies. GCC markets, meanwhile, are expected to take direction from oil price movements, regional developments, and corporate earnings announcements.