MIDEAST STOCKS-Gulf equities rally on US-Iran ceasefire agreement

By Mohd Edrees and Ateeq Shariff

April 8 (Reuters) - Gulf stock markets ended higher on Wednesday after the U.S. and Iran agreed to a fragile two-week ceasefire deal, which includes the immediate and secure reopening of the Strait of Hormuz.

Markets have remained on edge since the U.S.-Israel war against Iran broke out in late February, with Tehran's effective closure of the strait - a vital artery for 20% of global oil and gas supplies - fuelling inflation concerns.

U.S. President Donald Trump on Tuesday said the last-minute deal was subject to Iran agreeing to pause its blockade of the strait. Iranian Foreign Minister Abbas Araqchi said Tehran would cease counter-attacks and provide safe passage through the waterway if attacks against it stopped.

Brent crude futures LCOc1 were down $17.47, or 16%, at $91.80 a barrel by 1205 GMT. O/R

U.S. presidential policies remain difficult to predict, however, and investors are expected to stay cautious.

The announcement has been well received and UAE equity market fundamentals remain strong, said Tariq Qaqish, deputy CEO at FH Capital. But higher risk levels are increasing the discount rate used to value capital markets, which may put pressure on valuations, he added.

Dubai's main market .DFMGI surged 6.9% in its biggest intraday gain since March 2020, buoyed by a 13% jump in blue-chip developer Emaar Properties EMAR.DU and an 11% jump in top lender Emirates NBD Bank ENBD.DU.

Among other gainers, budget airline Air Arabia AIRA.DU soared 10.8%.

Dubai's main index has been the worst performer among its regional peers recently, dropping more than 16% in March as the conflict continued.

Late last month, Dubai approved 1 billion dirhams ($272.34 million) in economic facilitation measures to support businesses for a period of three to six months starting April, the Dubai Crown Prince said on X on Monday.

Abu Dhabi's benchmark index .FTFADGI climbed 2.9%, with its largest lender First Abu Dhabi Bank FAB.AD rising 5% and real estate giant Aldar Properties ALDAR.AD soaring 10.1%.

Energy firm Adnoc Gas ADNOCGAS.AD gained 3.5%, while Abu Dhabi Ports Company ADPORTS.AD advanced 11.1%.

Qaqish said he expected the UAE government to keep supporting the economy through aid for banks, small and medium enterprises and new measures to restore confidence.

In Qatar, the index .QSI rose 3.7% as all its constituents advanced, with the Gulf's biggest lender, Qatar National Bank QNBK.QA, climbing 4.2%.

Petrochemicals maker Industries Qatar IQCD.QA rose 5.8%, while Qatar Gas Transport QGTS.QA was the top gainer, climbing 8.1%.

The prospect of a reopened Strait of Hormuz has removed part of the extreme tail risk markets had been pricing in, prompting a rebound in regional equities, said Ahmad Assiri Research Strategist at Pepperstone.

But this looks more like tactical repositioning than fresh inflows, he said, adding that while sentiment has improved, conviction remains limited and the durability of the rally will depend less on valuations and more on whether the conflict continues to de-escalate.

Saudi Arabia's benchmark index .TASI ended 2.3% higher, led by a 2.8% rise in Al Rajhi Bank 1120.SE.

Budget airline flynas 4264.SE closed 8.9% higher.

Unlike its regional peers, the Saudi stock market was the least affected during the war. The rise in global oil prices generated substantial financial gains for Iran, Oman and Saudi Arabia, while costing states without alternative export routes billions of dollars, a Reuters analysis found.

Saudi energy stocks, meanwhile, gave back part of their recent gains, with oil major Saudi Aramco 2222.SE falling 2.8% on Wednesday after rising more than 10% since the conflict began. The Saudi energy index <.TENI> dropped 1.9%.

Yanbu National Petrochemical Co 2290.SE dropped 5.3% after surging more than 41% last month.

Boursa Kuwait .BKP added 1.7%, while Bahrain's index .BAX rose 0.6%.

Outside the Gulf, Egypt's blue-chip index .EGX30 climbed 4.1%, with most of its constituents in positive territory, including Commercial International Bank COMI.CA.

($1 = 3.6719 UAE dirhams)