Stock markets in the United Arab Emirates (UAE) and the wider Middle East are expected to see a major uptick in the near-term, driven by a spike in capital flows from Western markets and strong demand expected in the region’s economies, market experts told Arabian Business.
This comes as sectors like artificial intelligence, renewable energy and fintech continue to attract large-scale global investments.
The growing stress in Wall Street fuelled by President Donald Trump’s recent comments and his back-and-forth stance on trade tariffs, along with the fading excitement about AI’s impact on the market, will lead to capital flowing out of overpriced US stocks into the UAE, MENA and other regions, according to experts.
A series of tepid economic reports on the US economy could further accentuate the capital outflow.
The US stock market has been seeing a major sell-off in recent days, led by the “Magnificent Seven” tech stocks – Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla – plunging into a bear market, falling more than 20 per cent from their highs.
The tide has turned dramatically in recent weeks for the ‘Magnificent Seven index’ – which were celebrated as the crown jewels of Wall Street until very recently, accounting for much of the US market’s gains in 2024, while pulling in billions of dollars from overseas investors.
Tesla and Nvidia, in particular, face company-specific headwinds, with the Elon Musk-promoted company struggling with weak demand in key markets like China and Germany, while Nvidia is dealing with rising competition and regulatory concerns over AI chip exports.
“The tech sell-off [in the US] has a two-fold impact on global markets, including the UAE and the MENA region,” Jacob Falkencrone, Global Head of Investment Strategy at Saxo Bank, told Arabian Business.
“Market volatility in the US may lead to a more cautious investment climate, influencing capital flows into emerging markets.
“MENA economies, on the other hand, have been actively diversifying, with AI, renewable energy, and fintech emerging as strong growth areas. These sectors continue to attract investment, cushioning the region from broader market turbulence,” he said.
Vijay Valecha, Chief Investment Officer at Dubai-based Century Financial, said the banking and financial sector, which makes up 40 per cent of the UAE stock market, would perform well.
“These sectors are tariff resistant and would somewhat protect the UAE markets from broader tariff-related volatility,” Valecha told Arabian Business.
UAE, GCC growth projection attract global investments
Valecha said a major positive of capital markets in the UAE and the GCC region will be their elevated levels of economic growth this year.
“Looking at the GCC region, in 2025, growth is projected to accelerate significantly to 4.1 per cent as oil production is likely to recover and shipping disruptions are expected to ease.
“Moreover, non-oil GDP growth in the UAE is expected to remain strong at 5 per cent, resulting mainly from the strategic plans and policies implemented by the government to attract foreign investments and promote economic diversification,” he said, adding that these factors will ensure potentially higher returns for investors.
Falkencrone said investors who remain disciplined and focus on fundamentals rather than fear-driven selling may find attractive entry points in global and regional markets like the UAE and the GCC.
Market participants said they are already observing a rise in the flow of capital out of overpriced US stocks into these regions.
Besides, a series of tepid economic reports and the ongoing implementation and subsequent cancellation of US tariffs against major trading partners continue to stress Wall Street, accentuating the capital outflow, they said.
Sector experts said these factors also raise demand concerns for some commodities, maintaining a continued focus on safe havens such as gold to mitigate some of the potential dangers.
Market upheaval in Western markets fuel buying opportunities
Market experts, however, said despite near-term volatility, the correction in the US and other major global markets may present strategic buying opportunities for long-term investors.
Previously overvalued stocks are now trading at more reasonable levels, making disciplined, fundamentals-driven investing key in both global and regional markets, they said.
The Century Financial investment chief said despite the current risk-off sentiments and broad market sell-off, the future outlook for the US economy still remains strong, with Nasdaq and S&P 500 expected to report earnings growth of 21 per cent and 11.6 per cent for 2025, respectively.
“Just 20 days ago, the US stock market was at record highs, and the economy seemed to be in good shape, with no signs of a recession. But now, sentiment has completely shifted – investors are in “extreme fear” mode, according to the Fear and Greed Index,” he said.
Valecha said this sudden downturn is due to a mix of factors: uncertainty over tariffs, concerns about a possible recession fuelled by President Trump’s recent comments, and fading excitement about AI’s impact on the market.
“Even though the economy was still growing at the end of last year and job growth continued in the first two months of 2025, economists now see a risk of a recession – though not necessarily an imminent one,” he said.
Falkencrone said though the sharp decline in the ‘Magnificent Seven’ tech stocks has raised concerns, the market sentiment can shift quickly.
“While the Nasdaq Composite has taken a hit and the index has entered a bear market, long-term fundamentals for these companies remain strong,” he said.
The Saxo Global Head of Investment Strategy, however, said the current downturn reflects broader economic pressures, including high interest rates, persistent inflation, and geopolitical risks, which are driving a shift away from growth stocks toward defensive sectors.
A historical analysis shows that, in the eight corrections the Nasdaq-100 (NDX) Index has undergone since 2000, the average loss during these periods was 14 per cent, and they lasted for just under three months.
After the downtrend, the index recovered the losses incurred in a little more than two months, with an average return of about 12 per cent.
Valecha said the Nasdaq Index has recently declined approximately 13.4 per cent, settling at a low of $19,243 from the high of $22,222 set on February 19.
“A similar trend was witnessed in July 2024 as well, when the NDX Index dipped about 15 per cent in about 20 days and from there on, the index gained about 15 per cent over the next 2 months,” he said, indicating a rebound could be in the offing soon.
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