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Gulf Markets Plunge, Oil Prices Lower

Fears of a global recession and falling oil prices are driving Gulf stock markets down dramatically, once again, and the generally morose economic climate has Arab investors scrambling for cover, as Edward Yeranian reports for VOA from Beirut.

Stock markets in the Gulf and across much of the Arab world are plummeting, after a short reprieve, amid fears of a global recession and a dramatic drop in oil prices, from a high of $147 in August, to around $73 Thursday.

The Saudi stock market is closed, due to the Islamic weekend, but markets in Dubai, Abu Dhabi, Qatar and Oman were off from between 5 to 7 percent, amid large drops in the oil and real estate sectors.

The United Arab Emirates has also agreed to pump more than $32 billion of liquidity into local banks, and to guarantee bank deposits, while Kuwaiti monetary authorities are following a similar course, according to Ibrahim Dabdoub, Chairman of the Kuwait National Bank.

He says the first reflex was to pump more liquidity into the markets, via the banks, and then to stabilize markets by buying shares in financial companies, and calm worried investors.

The executive director of the Emirate's Diman Corporation, Shehab Qarqash, told al Arabiya TV that he predicts a "stormy future for all markets and every economic sector, because we are facing a truly global crisis."

The Organization of Petroleum Exporting Countries, OPEC, cut its forecast for world oil demand, in its latest report, writing that "the fallout on the real economy from financial market headwinds is expected to be considerable."

Professor Louis Hobeika of Lebanon's Notre Dame University says that the precipitous recent drop in oil prices is the root cause of economic havoc in Gulf markets.

"The problem is that the Gulf economies remain very much linked or dependent on oil, and therefore, whenever oil prices fluctuate, the economies do, too. And, as you know, the oil price, the barrel, has gone down from about $150 to $75 dollars, which means, can you imagine losing 50 percent of your income, in a matter of days?" he asked. "And this creates instability, lack of confidences, worries, too, because governments, the budgets, have been forecasting based on higher oil prices, and therefore, this very quick slowdown or decline in the price of oil creates lots of financial turmoil in the economies, and not only financial turmoil, but also economic turmoil, and therefore, I expect the Gulf economies to be more careful about, especially, their expenditures, their employment, and so on."

OPEC is planning an emergency meeting next month in Vienna to discuss what to do in the face of collapsing oil prices. But several top Arab economists are complaining that such a meeting is "too little, too late," to stop the rapid slide in oil prices.