Oil prices surged by more than 4 per cent on Thursday as Saudi military action on Yemen stoked fears of disruption to global supplies.
Brent crude was trading at about US$58 a barrel late afternoon UAE time, its highest level in more than two weeks.
Saudi Arabia carried out air strikes against Houthi rebels on Wednesday after five GCC states said they would answer calls from Yemen’s beleaguered president, Abdrabu Mansur Hadi, for intervention in the country.
Mr Hadi fled his stronghold in the southern city of Aden for an undisclosed location on Wednesday, after the arrest of the defence minister Mahmud Al Subaihi by the Houthis.
However, the impact of the events in Yemen on oil prices was likely to be short lived, according to Tom Pugh, a commodities economist with Capital Economics.
“The Saudi actions really spooked the market this morning, but it’s unlikely to impact prices too much going forward,” he said.
“I wouldn’t be surprised if prices dropped back down in the coming days.”
Yesterday’s rise in on oil prices helped to bolster Arabian Gulf stock markets, which shrugged off sharp falls at the start of trading to end little changed.
Saudi Arabia’s stock market, which recorded its largest one-day fall since mid-December on Wednesday, fell by more than 4 per cent in the opening minutes of trading, but rallied to close up 0.4 per cent.
In the UAE, the Dubai Financial Market General Index plunged 6 per cent at the open, before closing down just 0.8 per cent at 3,407.25.
“Loads of stocks hit their lower limits in early trading, but there are a still a number of investors who believe that the outside involvement in Yemen will be short lived,” said Khaldoun Jaradat, a trading manager at Brokerage House Securities.
“These people, including foreign investors, bought back in to stocks taking advantages of the cheaper prices.”
Arabtec Holding was among the heaviest losers, closing down 3.48 per cent at Dh2.22, followed by Damac Properties and DFM, the listed bourse operator, which both ended down 3.23 per cent.
Shuaa Capital and Emaar Malls were the main gainers, closing up 3.11 per cent and 2.53 per cent respectively.
The Abu Dhabi Securities Exchange General Index was little changed, closing up 0.03 per cent at 4,373.13.
“Many people are still holding on to their shares, waiting to see what happens at the weekend,” said Mr Jaradat.
“If events in Yemen fizzle out things will go back to normal, but if they intensify we can expect to see further falls.”
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