How the 2024 US Elections Could Impact the UAE

Key Areas of Potential Impact

Oil Prices and Supply Quotas - Crude Oil Election Outlook
Global Stock Markets
Central Bank Policies and Inflation Rates
Renewable Energy and Tech Investments
Foreign Relations with the Middle East
UAE MSCI Index

Oil Prices and Supply Quotas

If Trump returns to the White House, his policies favoring expanded oil production and deregulation could pressure oil prices and prompt OPEC to reassess supply quotas. This could, in turn, impact the UAE's oil revenue. While the UAE has focused on diversifying its economy to lessen oil dependence, crude prices remain a component of its revenue.

In contrast, a Harris administration would likely continue supporting renewable energy, which may benefit UAE’s shift towards sustainable development and reduce global reliance on fossil fuels.

Global Stock Markets

With Harris’s plans to further raise capital gain taxes, her administration is unlikely to have a positive impact on the stock market. Initially, a Harris presidency might lead to a bearish or cautious market reaction compared to a Trump victory.

A Trump win could drive broader market optimism and risk due to anticipated tax cuts and increased tariffs, potentially boosting markets but also introducing some instability. This mixed impact could create both growth opportunities and irregular volatility.

Central Bank Policies and Inflation Rates

With the AED pegged to the US Dollar, inflation rates and interest rate decisions by the Central Bank of the UAE (CBUAE) align closely with those of the US economy and the Federal Reserve. As US inflation rates moved closer to the 2% target, the Fed implemented a 50-bps rate cut, mirrored simultaneously by the CBUAE.

In the context of the upcoming US elections, a Trump presidency could disrupt the easing cycle in monetary policy through tariffs and fiscal stimulus policies, potentially increasing inflationary pressures and directly impacting the UAE economy. Despite inflationary challenges, the UAE’s economy has shown resilience to high inflation and interest rates so far.

Renewable Energy and Tech Investments

The UAE's partnerships with the US encompass major renewable energy initiatives, such as PACE (Partnership for Accelerating Clean Energy), which combines economic and technological efforts to address climate change. A Harris administration would likely continue supporting these initiatives.

However, a Trump victory may introduce uncertainty, given his historical reluctance to prioritize climate action, potentially impacting long-term projects like those aligned with the UAE's Vision 2035.

Foreign Relations with the Middle East

In the context of ceasefire agreements in the Middle East, Trump’s approach is expected to be more aggressive than Harris's, potentially introducing higher costs and market volatility across sectors, including commodities and stock markets in the UAE.

In contrast, Harris is likely to pursue a more diplomatic approach concerning the humanitarian crisis and ceasefire deals, which may support steadier market reactions.

UAE Market Analysis: MSCI UAE Index

UAE MSCI Index: Weekly Time Frame – Log Scale

Source: Tradingview

The UAE MSCI ETF, representing the performance of the UAE’s mid- and large-cap market segments, hit a two-year low in June 2024 after a prolonged consolidation from 2023 to 2024. The index rebounded positively in August 2024, mirroring gains in the US market, and is currently sustaining this breakout, testing its 50-period moving average and maintaining an uptrend from the June lows.

With the US elections and FOMC meeting approaching, a Trump victory could bring broad positive sentiment to markets, albeit with potential short-term volatility. In contrast, a Harris win may prompt short-term pullbacks due to higher tax policy expectations.

Technically, the UAE index appears well-positioned to continue its upward trend, with a strong close above the October 2023 highs (15.70) indicating potential further gains. However, if this resistance is not breached, a pullback toward the two-year support level could occur.

Despite global challenges, the UAE’s economic resilience against inflation, interest rates, and geopolitical tensions is expected to endure, although short-term fluctuations may arise in response to the US election outcome.

— Written by Razan Hilal, CMT – on X: @Rh_waves

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.