Saudi Arabia's stock market suffered the biggest one-day decline since 2008 yesterday amid growing political tension in the region.
The Saudi Tadawul All-Share Index fell 6.78 per cent to 5,538.72, its 12th straight day of losses and the largest drop since November 2008. The index has lost more than 17 per cent of its value since the onset of the Egyptian unrest in January.
"People are concerned with what's happening in the wider region and there's obviously panic selling," said John Sfakianakis, the chief economist at Banque Saudi Fransi. "Retail investors account for most of the trading activity on the Tadawul exchange."
Regional stock markets have fallen in recent weeks while the price of oil has crept higher, with Brent crude trading at more than US$112 yesterday. Analysts expect that trend to continue as the crisis in Libya escalates.
Dubai bucked the regional trend yesterday, rising by 1 per cent.
Marco Dunand, the chairman of the energy trading company Mercuria, said there was a chance oil could top its all-time peak of $147 and rise to $150 a barrel if turmoil continues.
"It could happen within the next couple of months without a problem," he said.
Saudi Arabia has embarked on a US$37 billion (Dh135.89bn) public spending programme. The government has announced a series of royal decrees aimed at creating jobs and giving benefits to students.
But political events are developing at a rapid rate and proving worrisome to Saudi investors.
* with reporting by April Yee