Saudi Stocks Drop to Lowest Since November 2012 as Oil Retreats

  • Al Rajhi Bank is biggest contributor to Tadawul's loss
  • Petrochemical stocks retreat to lowest since May 2009

Saudi stocks fell to the weakest level in more than three years after oil, the nation’s main source of income, dropped to the lowest since 2004.

The Tadawul All Share Index retreated 3.3 percent to close at 6,517.71, extending declines for a third day. Al Rajhi Bank’s 3 percent slide was the biggest contributor to the drop. The Tadawul All Share Petrochemical Industries Index sank to the lowest level since May 2009.

Brent crude slumped below $35 a barrel before U.S. government data forecast to show fuel supplies rose in the world’s biggest consuming nation. The continued slide in crude intensifies the pressure Saudi Arabia’s finances are already under as the nation fights an expensive war in Yemen. Relations with Iran deteriorated this week after the Saudis executed 47 men, including a Shiite cleric, sparking a diplomatic standoff.

"Saudi Arabia’s market is correlated to the oil price," said Nayal Khan, the Riyadh-based head of institutional equities sales trading at Saudi Fransi Capital. Tension between Iran and Saudi Arabia "means that it would be more difficult for them to come to an agreement in terms of curbing supply,” he said.

Relations between the world’s biggest oil exporter and Iran have soured in the worst diplomatic crisis between the two since the late 1980s. In the four days since the executions, protesters stormed the Saudi embassy in Tehran and set parts of it on fire, and the kingdom, along with a number of its allies, cut diplomatic ties with the Shiite-majority country.

Saudi Basic Industries Corp., one of the world’s biggest petrochemicals manufacturers, slid 3.2 percent and was headed for the lowest level since September 2009. The Tadawul’s petrochemicals gauge dropped 4.8 percent. Brent crude sank 4.7 percent at 4:59 p.m. in Dubai.

Before it's here, it's on the Bloomberg Terminal.