Middle East Tensions Escalate as Iran Threatens Retaliation, Oil Extends Gains

Middle East stock markets are bracing for a volatile session on Tuesday as geopolitical risks intensify across the region. Oil prices extended their gains amid growing fears of prolonged conflict, after Iran warned it would retaliate against any new US attacks on its assets. The threat has heightened concerns over supply disruptions, with traffic through the Strait of Hormuz reportedly slowing.

In the Gulf, equities were mixed as investors weighed the fallout from US-Iran flare-ups. Iran has threatened the US with new 'economic warfare' and missile strikes, while Yemen's Houthi rebels launched attacks on Saudi Arabia, injuring 73 people, according to the Saudi-led coalition.

The UAE has stated that its energy exports will not be 'held hostage' by the Iran war, while Oman reported evacuating 16 crew members from a Saudi vessel attacked by Iran. Meanwhile, a Qatari official noted that the conflict demonstrates that a strategic alliance with the US is not sufficient for regional security.

On the diplomatic front, Saudi Arabia is preparing to grant the IAEA more intrusive inspection powers, according to agency chief Grossi. The IAEA also commented on Syria's nuclear reactor, suggesting it could have been useful for weapons purposes.

In corporate news, Saudi Arabia's Public Investment Fund has launched a new firm to develop tourism and residential areas on the Gulf coast. The kingdom has also cancelled a wheat tender, while Abu Dhabi's ADNOC is reportedly in talks for stakes in Thailand and Dangote Refinery. In the UAE, AD Ports announced its SAFEEN Drydocks unit has expanded capacity with the region's largest floating dock, and Aldar launched its Sei Saadiyat development.

Gold prices gained as the dollar eased, with US inflation data on investors' radar. Asian stocks wavered as the yen surged, reflecting broader risk-off sentiment across global markets.