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How the Deal with Israel Might Affect the UAE Stock Market?

How the Deal with Israel Might Affect the UAE Stock Market?

Initially agreed on August 13th, 2020, the Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization between the United Arab Emirates and the State of Israel is a breakthrough in terms of bringing together two of the most important countries in the Middle East, with major positive implication for commerce and the UAE stock market.


Historic Peace Agreement reached in August 2020

Signed at the White House on September 15th, it marks the beginning of cooperation, including at a military level between UAE and Israel, at a time when rising tensions with Iran continue to be a major concern in the area. Since August, UAE established telephone links to Israel by unblocking direct dialing to the +972 country code.

This is good news for residents in UAE, considering they can start to do business with Israel and as a result of this, companies listed on the stock market can increase their revenue substantially.

The past year has seen a massive increase in the number of new retail trading accounts, showing a lot of new individuals are now interested in the stock market. Brokerage houses like Q8 Trade offer access to a broad range of trading instruments, including stocks from the Middle East, which is why new customers continue to pour in.

Improvements in commercial ties

Removing the previous restrictions comes at a time when increased commercial ties can act as a relief on the UAE economy. Heavily reliant on oil production, like many other Middle East nations, 2020 will be a year to forget, given the substantial economic contraction. Doing business internationally can have a meaningful impact on the GDP, while also creating more trust due to the alleviation of political and military risks.

UAE is now the third Persian Gulf country to join the Abraham Accords, after Egypt in 1979 and Jordan in 1994, which made Israel give up on plans for annexing parts of the West Bank. In the longer run, the agreement has major ramifications, including helping the UAE reduce its reliance on oil exports. The country now has a new trading partner and opening up towards Israel can mean increased revenue from tourism or exports.

Companies and stock markets from both countries to benefit

All of this can have a direct impact on companies listed on the UAE stock exchange. Now that retail trading is broadly available, people can get involved in the market using trusted software like the Q8 Trade trading platforms. There are also plenty of other trading tools facilitating not only the technology side but also with regards to education and market analysis.

Based on the June forecasts from the World Bank, the United Arab Emirates economy will contract by 4.5% this year, mainly because the coronavirus forced the government into imposing lockdown measures. The country is still experiencing high new cases, with 1,100 as the latest count, the highest on record.

Faced with the likelihood of increased economic pressure due to the pandemic, the agreement with Israel comes as a relief for UAE and the local stock market. The ADX General (ADI), one of the two major local indices is up to levels not seen since the beginning of March 2020, currently trading around $4,518, while DFM General (DFMGI) trades around 2,273, up more than 35% from the March lows.

Even though rising COVID-19 cases locally and across the world could be a headwind, in the long run, UAE can leverage the agreement with Israel and establish more robust economic ties, helping domestic companies to gain access to new sources of revenue.

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