Major stock markets in the Gulf tumbled on Monday, tracking Asian shares lower on fears that the United States could be heading for recession, while concerns about a widening conflict in the region added to the worries.

The U.S. unemployment rate jumped to near a three-year high of 4.3% in July amid a significant slowdown in hiring, heightening fears the labor market was deteriorating and potentially making the economy vulnerable to a recession.

The worryingly weak July payrolls report saw markets price in a 78% chance the Federal Reserve will not only cut rates in September, but ease by a full 50 basis points.

Saudi Arabia’s benchmark index declined 3.1%, dragged down by a 4.7% slide in aluminium products manufacturer Al Taiseer Group, while the country’s biggest lender Saudi National Bank retreated 4% despite reporting a rise in quarterly profit.

The Qatari benchmark fell 2.5%, with all its constituents in negative territory including the Gulf’s largest lender by assets Qatar National Bank, which was down 2.3%.

Gulf stocks mixed on Middle East tensions, US rate-cut outlook

Israel and the United States are bracing for a serious escalation in the region after Iran and its allies Hamas and Hezbollah pledged to retaliate against Israel for the killings of Hamas’ leader Ismail Haniyeh and Fuad Shukr, a top military commander from Lebanese armed group Hezbollah, last week.

Dubai’s main share index dropped 4.2%, weighed down by a 8.9% plunge in blue-chip developer Emaar Properties.

In Abu Dhabi, the index was down 2.7%.

Oil - a catalyst for the Gulf’s financial markets – extended losses in a volatile session, as fears of a recession in top oil consumer the United States offset supply worries stemming from mounting tensions in the Middle East, the world’s largest oil producing region.