Major Gulf Markets Edge Higher as Investors Assess Trump’s Tax Bill#

On July 1, 2025, major Gulf stock markets saw modest gains in early trading, aligning with positive movements in Asian markets, as investors awaited the U.S. Senate’s vote on President Donald Trump’s 3.3 trillion tax and spending legislation, known as the “One Big Beautiful Bill Act.” The bill, which extends 2017 tax cuts and introduces new fiscal measures, has sparked concerns about its 2.4–3.3 trillion deficit impact over the next decade, influencing global market sentiment. Link Link

Market Performance#

Saudi Arabia: The benchmark index (.TASI) rose 0.3%, driven by a 4.3% surge in ACWA Power Company (2082.SE) and a 0.1% gain in Saudi Aramco (2222.SE). Rising crude oil prices, fueled by a 12-day Iran-Israel conflict and strong summer fuel demand, supported the market, with Saudi Arabia potentially increasing August crude prices to a four-month high. Link
Dubai: The main share index (.DFMGI) climbed 0.3%, reaching a 17-year high, led by a 0.9% increase in Emirates NBD (ENBD.DU).
Abu Dhabi: The index (.FTFADGI) gained 0.1%, reflecting cautious optimism.
Qatar: The index (.QSI) rose 0.1%, supported by a 0.3% uptick in Qatar National Bank (QNBK.QA).

Context and Influencing Factors#

Trump’s Tax Bill: The “One Big Beautiful Bill Act” extends the 2017 Tax Cuts and Jobs Act (TCJA), offering tax breaks for individuals and businesses, including no taxes on tips, overtime, and Social Security benefits, and a higher SALT deduction cap of 40,000. However, the Congressional Budget Office (CBO) estimates it will increase the U.S. deficit by 2.4 trillion conventionally (3.7 trillion in tax cuts offset by 1.3 trillion in spending cuts) over 10 years, raising concerns about U.S. debt and global bond market spillovers. Link Link Link
Tariff Concerns: Trump’s proposed tariffs, including 25% on Canada and Mexico, 10% on China, and up to 50% on the EU, have heightened fears of a global trade war, potentially increasing consumer prices and slowing economic growth. These tariffs could raise 2–5.2 trillion in revenue but reduce U.S. GDP by 0.8–8%, impacting Gulf economies due to their dollar-pegged currencies and trade ties. Link Link Link
Oil Price Dynamics: Oil prices stabilized after an earlier dip, driven by expectations of an OPEC+ output hike in August and geopolitical tensions. Gulf markets, heavily reliant on oil, benefited from these dynamics, though Trump’s tariff uncertainties tempered gains. Link
Monetary Policy: Gulf Cooperation Council (GCC) monetary policies, tied to the U.S. Federal Reserve due to dollar pegs, face pressure from Trump’s push for lower U.S. interest rates (0.5–1.75%), potentially reducing expected Fed rate cuts and affecting regional financial markets. Link

Investor Sentiment and Outlook#

Cautious Optimism: Gulf markets rose modestly as investors weighed the tax bill’s potential to stimulate U.S. demand against its deficit and tariff-related risks. The bill’s passage in the House (215-214) and ongoing Senate debates, with a slim 51-49 advance, signal political uncertainty. Link
Sector Impacts: Defense, industrials, and energy sectors may benefit from the bill’s provisions, such as increased military spending and TCJA business incentives, while clean energy firms face challenges due to a new tax on wind and solar projects. Link
Global Spillovers: The Institute of International Finance warns that rising U.S. debt and tariffs could increase global borrowing costs, impacting Gulf markets through higher Treasury yields (30-year at 5.031%, 10-year at 4.509% as of May 23). Link Link

Conclusion#

Gulf markets showed cautious gains on July 1, 2025, driven by rising oil prices and positive Asian market trends, but tempered by uncertainties surrounding Trump’s tax bill and tariff policies. Investors are closely monitoring the U.S. Senate vote and potential trade war implications, which could affect global growth and Gulf economies. For further insights, contact Reuters at www.reuters.com or financial advisors for market-specific guidance.