As geopolitical tremors from the escalating conflict between Iran and Israel reverberate across the Middle East, most Gulf stock markets closed lower on Wednesday, reflecting palpable investor anxiety. The intensifying six-day-old hostilities have ignited fears of wider regional instability, prompting a cautious retreat among traders.

Adding to the unease, Iran’s Supreme Leader Ayatollah Ali Khamenei reportedly rejected U.S. President Donald Trump’s demand for an unconditional surrender, while Iranians reportedly fled Tehran amidst intensified Israeli airstrikes.

Saudi Arabia’s benchmark index, a bellwether for the region, notably dropped by 1.2%. This downturn was primarily driven by significant slides in key players such as ACWA Power Company, which saw a 3.3% decline, and Saudi Arabian Mining Company, easing by 2%. Adding to the list of notable losers, Flynas Company, an airline backed by Prince Waleed bin Talal, experienced a challenging debut, closing 3.4% lower. Even the regional oil titan, Saudi Aramco, was not immune, recording a slight dip of 0.3%.

Beyond the immediate conflict, investor sentiment was further tempered by anticipation surrounding today’s U.S. Federal Reserve meeting. With most market participants expecting the central bank to maintain current interest rates, this contributed to an overarching mood of caution. This broad uncertainty rippled across the Gulf, with Dubai’s main share index closing 1.2% down, led by a 1.2% dip in blue-chip developer Emaar Properties, and Abu Dhabi’s index also seeing a 0.4% decline.

The geopolitical turbulence also kept crude oil prices steady after a 4% gain in the previous session, as markets carefully weighed the potential for supply disruptions stemming from the Iran-Israel conflict, alongside the looming possibility of direct U.S. involvement. In Qatar, the main index shed 0.6%, notably impacted by Qatar Gas Transport Nakilat’s 3.8% fall. Bucking the trend outside the Gulf, Egypt’s blue-chip index managed a 0.4% gain, buoyed by a significant 4.1% jump in Fawry for Banking Technology and Electronic Payment.