Gulf stocks traded on the back foot on Monday with markets playing it safe as they brace for a series of interest rate hikes this week.

The US Federal Reserve and other major central banks are poised to take more aggressive monetary tightening steps when they meet, which could trigger further capital flight from regional markets.

The imminent hawkish moves from banking watchdogs are raising concerns about global economic growth outlook and sustainable oil demand.

Governments in the region significantly rely on oil for their revenues and long-term subdued demand for energy is set to have knock-on impact across sectors.

Saudi Arabia’s benchmark index clawed back some early losses and traded down 0.2% on its third consecutive day of decline. Real estate stocks dropped more than other sectors.

Gulf stocks sink as markets brace for more aggressive rate hikes

Gulf Cooperation Council countries, including the kingdom, are in the firing line of Fed policy moves as five of them have their currencies pegged solely to the dollar and broadly match US monetary steps.

Kuwait’s dinar is linked to a basket of currencies believed to be dominated by the greenback.

Qatar equities traded 1.2% lower. Banking shares took the biggest hit as higher interest rates are expected to squeeze lending to businesses and households.

Dubai equities shed 0.8% after nearly all its sectors slipped into the red and heavyweight real estate shares led the losses.

The Abu Dhabi index fell 0.1% due to weakness in banking stocks.

However, the market received support from Abu Dhabi National Energy Company and Multiply Group, which soared 11.7% and 7.7%, respectively.

The duo continue to gain after the latter acquired a 7.3% stake in TAQA group last week in a deal amounting to 10 billion dirhams ($2.72 billion).