Prospect of the Islamic Republic pumping an additional 500,000 barrels a day sends stock markets in Dubai and Saudi Arabia into tailspin
Stock markets across the Middle East saw more than £27bn wiped off their value as the lifting of economic sanctions against Iran threatened to unleash a fresh wave of oil onto global markets that are already drowning in excess supply.
All seven stock markets in the Gulf states tumbled as panic gripped traders. London shares are now braced for a second wave of crisis to hit when they open on Monday morning after contagion from China sent the FTSE 100 to its worst start in history last week.
Dubai's DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia's Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering to end down 5.44pc at 5,520.41, its lowest level in almost five years.
The Qatar stock exchange, fell 7.2pc to close at 8,527.75, and the Abu Dhabi Securities Exchange shed 4.24pc to finish at 3,787.4. The Kuwait market returned to levels not seen since May 2004 as it slid 3.2pc lower, while smaller markets in Oman and Bahrain dropped 3.2pc and 0.4pc respectively.
The Iranian stock index gained 1pc, making it one of the best performing markets in the world with gains of 6pc since the start of the year.
The dramatic moves came following the historic report from the UN nuclear watchdog, which showed that Iran has met its obligations under the nuclear deal, clearing the way for the lifting of sanctions.
The Vienna-based International Atomic Energy Agency issued the landmark document late on Saturday evening, sparking mayhem as markets opened on Sunday, the first day of trading in the Middle East.
The stock markets in Dubai and Saudi Arabia have been plunged into a painful bear market, losing 42pc and 38pc respectively, ever since Saudi Arabia decided to ramp up oil production in November 2014.
Oil prices fell below $30 for the third time last week as traders prepared for the prospect of Iranian oil flooding global markets.
The Islamic Republic has vowed to return its oil production to pre-sanction levels that stood above 3m barrels a day.
“The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported on Sunday, citing Amir Hossein Zamaninia, deputy oil minister.
Fears that the Islamic Republic could quickly ramp up production sent Brent crude falling by 3.3pc to $29.43 on Friday - matching lows last seen in 2004.
West Texas Intermediate also slipped back to $29.60, a decline of 4.5pc.
Standard Chartered became the latest bank to raise fears over the oil price by downgrading its outlook to $10, following the likes of Goldman Sachs, RBS and Morgan Stanley.
The price of oil was $115 per barrel 18 months ago until Saudi Arabia greatly increased production to crush rivals in the US and Russia.
The relentless fall in oil has seen prices return to levels not seen since 2004.
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