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Study shows Kuwait shares, oil correlation

There is an extremely strong positive correlation of 94 percent between oil prices and the Kuwait Stock Exchange (KSE) index, a new study by Kuwait Financial Centre (Markaz) has revealed.

The study tracked oil prices and KSE trends since 1994 and identified three phases where oil prices have clearly played a direct and key role in the performance of the stock market.
Markaz said that there was a “stagnant phase” between 1994 and 2000, when the oil price rose by 81 percent and the stock market gained 35 percent.

The second phase was a “bull phase” between 2000 and 2007 where oil surged by 255 percent and the stock market appreciated by a staggering 839 percent.

Then in 2008 came the “bear phase”, where oil prices slumped 49 percent and the stock market fell 30 percent.

“In a nutshell, oil plays a vital role in the economy and, therefore, the stock market,” Markaz said.

Furthermore, the findings can be used to predict the performance of the stock market at any given level of oil price.

If oil prices reached $100 per barrel, then the KSE’s upside from the current level could be a staggering 58 percent, according to Markaz.

However, if oil prices dropped to say $30 per barrel, then the evidence suggests that the downside would nearly 62 percent.

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