December 8, 2014 / 5:08 AM / 3 years ago

MIDEAST STOCKS-Downbeat oil prices may weigh on Gulf markets

DUBAI, Dec 8 (Reuters) - Falling crude prices may keep Gulf stock markets under pressure on Monday as oil dominates the thinking of retail investors.

Oil prices dropped more than a dollar on Monday to approach early December’s five-year lows after Morgan Stanley cut its price forecast for Brent crude, saying oversupply would likely peak next year after OPEC opted not to cut output.

Although analysts say most Gulf nations will be able to maintain spending despite lower revenues, state budgets in Oman and Bahrain may come under pressure, according to a Moody’s report published on Monday.

“While the sovereign wealth funds of Kuwait, the UAE, Qatar and Saudi Arabia can cover multiple years’ worth of government expenditures, Bahrain’s and Oman’s do not provide that level of cover,” it said.

“Moody’s expects that Saudi Arabia’s fiscal balance will turn into a deficit in 2015, and Bahrain and Oman’s deficits will widen significantly to above 7 percent of their respective GDP.”

Oman’s bourse tumbled 4.2 percent on Sunday after Standard & Poor’s cut its outlook for the country’s sovereign rating and local cement firms said natural gas prices would double next year.

Down 7.8 percent this year, Oman’s index is the second-worst performer in the Gulf after Kuwait which has fallen 10.6 percent. Bahrain’s market is less liquid and is up 13.1 percent in 2014. (Reporting by Olzhas Auyezov; Editing by Matt Smith)

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