Saudi Arabia’s stock market plunges amid low oil prices

Saudi Arabia’s stock market has experienced a drastic drop amid an unprecedented plunge in global oil prices.

The kingdom’s main stock index, Tadawul All-Share Index, plummeted 4.2 percent as Brent crude oil fell as low as USD 56.74 per barrel on Tuesday.

The shares of almost 160 companies declined, among them petrochemical giant Saudi Basic Industries.

Prices of petrochemical substances are connected with crude oil prices, and some of the oil producers in the Persian Gulf region have enjoyed access to subsidized feedstock, giving them better margins. However, that comparative advantage has been cut with cheap oil.

The downward trend in the Saudi stock market is predicted to continue as oil prices have fallen to their lowest point in more than five years.

Last week, Saudi Arabia declared a huge budget deficit for its 2015 fiscal year as the oil-rich kingdom begins to feel the impact of falling oil prices. Saudi Crown Prince Salman bin Abdulaziz Al Saud announced the USD 38.6-billion budget deficit on the state-run television on Thursday.

Oil prices have fallen about 50 percent over the last six months due to a glut of supplies by certain countries such as Saudi Arabia and weak demand as a result of lackluster global economic growth.