Gulf Stocks Mixed as Powell Faces Legal Scrutiny Over Fed Decisions

Gulf equities experienced a mixed performance on Monday as investors reacted to news surrounding legal proceedings against Jerome Powell, the Chair of the Federal Reserve. This development has raised concerns regarding the independence of the central bank and its monetary policy decisions.

In early trading, Brent crude for March delivery rose by 0.30%, reaching $63.53 per barrel at 11:43 am ET. Meanwhile, West Texas Intermediate (WTI) crude for February delivery increased by 0.14%, trading at $59.20 per barrel. The fluctuations in oil prices are being closely monitored as political uncertainty in the U.S. may impact energy markets.

Several Gulf stocks showed gains, with Saudi Arabian Mining Co (1211.SE) climbing 4.7% and Dar Al Arkan Real Estate (4300.SE) gaining 3.6%. The latter’s subsidiary, Dar Global (DARD.L), recently announced plans to launch luxury projects branded by Donald Trump, estimated at $10 billion. Additionally, ESG Emirates Stallions Group (ESG.AD) rose by 2.8% after signing development agreements with Rotana Hotels & Resorts, valued at approximately 900 million dirhams (around $245 million).

Despite these gains, Saudi Arabia’s benchmark stock index (.TASI) and the Qatari benchmark index (.QSI) also saw slight increases, while Dubai’s benchmark stock index (.DFMGI) faced declines. Companies such as Emaar Properties (EMAR.DU), Dubai Investments (DINV.DU), Alpha Dhabi Holding (ALPHADHABI.AD), and ADNOC Gas (ADNOCGAS.AD) experienced lower trading volumes.

The backdrop to these market movements includes the criminal investigation launched by the U.S. Department of Justice into Powell’s role in a $2.5 billion renovation project for the Federal Reserve’s Washington headquarters, which exceeded its budget by nearly $700 million. The investigation will assess whether Powell misled Congress regarding the project’s scope. This scrutiny comes in a context where former President Trump has been critical of Powell for maintaining high interest rates.

In response to the allegations, Powell stated, “This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.” This statement underscores the ongoing tensions between the central bank and political leadership.

As political uncertainty surrounding U.S. monetary policy continues, it poses risks to both equity markets and energy prices. A potential decline in the value of the U.S. dollar often correlates with rising crude prices, impacting global markets, including those in the Gulf region.

The unfolding situation will likely influence investor sentiment and market dynamics in the coming days, as stakeholders assess the implications of the investigation on monetary policy and economic stability.