The US-Iran war drags on Saudi Arabia’s IPO, and foreign capital continues to stay away because the market structure is too single.

Gold Financial reports that on June 11th, according to Bloomberg, a Saudi company's initial public offering (IPO) has been postponed, marking the latest setback for the Saudi stock market, which has underperformed its global peers for the fourth consecutive year. Due to the US-Iran war, Mutlaq Al-Ghowairi Contracting Co. decided to delay its stock offering, which was originally expected to be the largest listing in the Gulf region this year. This has worsened the situation for the Tadawul All-Share Index. Despite the rise in oil prices bringing unexpected gains, this index has only increased about 5% so far this year, slightly lagging behind the MSCI Global Index.
Although the Saudi government has been promoting increased investment in this $2.6 trillion market for years, foreign capital has remained largely absent from the Saudi stock market. A report from Bank of America shows that the Saudi stock market is still one of the assets with the lowest weighting in emerging market funds. The escalation of the US-Iran war has heightened foreign investors' caution, but there are other factors as well, most notably the market's composition dominated by energy, petrochemical, and financial stocks. While soaring oil prices have boosted energy giants like Saudi Aramco and several other companies, emerging market investors have generally avoided companies that are not related to technology and artificial intelligence.
In fact, even before the conflict erupted, the Saudi stock market was already struggling. Since 2022, Saudi Arabia has been experiencing persistent fiscal deficits, and the war has intensified these pressures. In the first quarter of 2026, the deficit more than doubled compared to the same period last year. To revive foreign investment, Saudi authorities earlier this year announced that they would allow non-residents to directly invest in Saudi stocks, a key step toward expanding market access. However, they have not yet revisited the restrictions on foreign ownership of Saudi stocks. Wall Street banks predict that lifting the current cap of 49% on foreign ownership could unlock $10 billion in new investments.
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