A Bet on Peace

Saudi Arabia's defence minister is in Tehran, and investors are already betting that diplomacy might succeed where months of fighting have failed.

Prince Khalid bin Salman travelled to Iran alongside Pakistan's army chief, Field Marshal Asim Munir, and Turkey's intelligence chief, Ibrahim Kalin, as the three countries seek a way to bring the regional conflict closer to an end. Their visit follows the Makkah defence agreement signed in August and comes amid renewed efforts to secure a lasting ceasefire.

There's no deal yet. But the prospect of one was enough to send Saudi stocks up 3.4% today, their biggest rally in more than a year, reversing Sunday's sharp selloff and lifting markets across the Gulf.

The war is still shaping how Saudi companies do business. Aramco wants to store crude closer to its Asian customers, while SABIC is sending exports through NEOM's Red Sea port and trimming its investment plans. Even the dairy business is seeing an unusual deal.

Saudi stocks bounced back on Monday as the prospect of a diplomatic breakthrough in Iran brought buyers back into the market. The Tadawul All Share Index (TASI) rose 3.4%, its biggest gain in more than 13 months, a day after shedding 2.6% and closing at 9,438 points.

The recovery was broad. Maaden gained 7.3%, while aramco rose 1.7%. The optimism spread across the Gulf, with Qatar's benchmark climbing 2.8%, its strongest session in more than five months, and markets in Dubai and Abu Dhabi also advancing.

What's driving it? Investors are responding to renewed diplomatic efforts involving Saudi Arabia, Turkey and Pakistan. The three countries are seeking to reduce tensions with Iran, raising hopes that the conflict's impact on energy infrastructure, shipping and regional trade could begin to ease.

The catch: A rally driven by peace hopes can reverse just as quickly if negotiations falter. Saudi equities remain exposed to security developments, higher business costs and disruptions to supply chains. Monday's gains show how much investors want a diplomatic breakthrough, not that one has been secured.

Saudi Arabia wants to keep some of its oil closer to its biggest customers. The Kingdom and Singapore have agreed to work toward a crude storage arrangement that would see Saudi Aramco store oil in Singapore's underground Jurong Rock Caverns from H2 2027.

The agreement is still preliminary. Singapore's Energy Market Authority and JTC Corporation, the storage owner, exchanged an MoU with Aramco on Monday, with storage volumes and financial terms yet to be disclosed.

Why Singapore? The city-state is a major Asian oil trading and refining hub, making it a useful location for Saudi crude destined for Southeast Asia. The Jurong Rock Caverns can hold roughly 9mn barrels of liquid hydrocarbons, although Aramco's allocation has not been specified.

The war has made the case stronger: Asia relied on the Middle East for roughly two-thirds of its crude imports before the conflict, according to Reuters. Disruptions through the Strait of Hormuz have forced importing countries to draw down inventories and reconsider where they hold emergency supplies.

Remember: Aramco already has a similar arrangement in Japan. It renewed an agreement last year to store around 8.2mn barrels in Okinawa, giving Japan preferential access during emergencies while allowing Aramco to use the facility as an Asian supply hub. The Singapore proposal would extend that model into Southeast Asia.

Saudi Arabia's biggest chemicals producer is putting NEOM's port to work. Sabic completed its first urea shipment through the Red Sea facility in Q3, adding another route for exports that would ordinarily depend on Gulf shipping lanes, according to its earnings call.

The Hormuz workaround comes at a price: SABIC moved polymer volumes across Saudi Arabia to western ports at 230% of pre-crisis levels, while vessel loadings rose 38% qoq. Selling and distribution expenses jumped SR916mn yoy as the company absorbed higher transport costs and continued disruptions to its supply chain.

The alternative routes are helping. Chemicals sales volumes recovered 24% qoq, with agricultural nutrients volumes jumping 68% as SABIC worked through the export bottlenecks that weighed on H1.

Why NEOM matters: The shipment gives the Port of NEOM, part of the Oxagon industrial development, a commercial role beyond serving the new city itself. It also shows how Saudi Arabia's Red Sea ports are becoming alternative export routes for industries concentrated on the Gulf coast.

The bigger picture: SABIC is recovering sales volumes, but moving products across the Kingdom is expensive. The question now is whether these alternative routes remain commercially attractive once shipping conditions improve.

The firm is tightening its spending plans as the chemicals industry faces weak demand, excess capacity and the cost of keeping exports moving during the war. The company lowered its 2026 capital expenditure guidance to $3bn-3.3bn from $3.5bn-4bn, a reduction of between $200mn and $700mn depending on where spending lands within the ranges.

What's behind the cut? During Monday's earnings call, CFO Salah Al-Hareky said SABIC had reviewed spending during the crisis, postponing some projects and changing the scope of others. The company expects to continue that approach as it prepares its 2027 investment budget.

The reduction comes alongside a mixed earnings picture. SABIC returned to a Q3 net profit of SR500mn, up 15% yoy, even as revenue slipped 3% to SR28bn. But the company remains in the red for 9M 2026, with a SR320mn net loss, compared with SR4.84bn a year earlier.

The headline profit needs some context: A major contributor was the reversal of an impairment on SABIC's investment in Swiss chemicals group Clariant, rather than a straightforward improvement in its underlying chemicals business. Higher logistics costs also continued to weigh on earnings.

Not everything is being cut: SABIC is still advancing its Fujian petrochemical complex in China and its Saudi ammonia and urea expansion, which will add 2.6mn tonnes of annual urea capacity. The company is also pursuing a new methanol project in Jubail.

What's next? SABIC has yet to set its 2027 spending guidance. Investors will be watching whether the latest reduction is a temporary response to the conflict or part of a longer-term shift toward more selective investment.

Saudi Arabia is looking beyond traditional tourism to attract some of the world's wealthiest travellers.

The agreement: Public Investment Fund-owned Sela and events company Tahaluf formally signed a 10-year hosting agreement in Jeddah on Sunday for the Red Sea Yacht Show, building on a partnership announced in September.

The inaugural event is scheduled for October 14–17, 2027, at Jeddah Yacht Club and Marina.

Organisers are targeting more than 50 yachts, 150 exhibitors and 10,000 visitors in the first edition.

Their ambition is to generate more than $500mn in economic activity through yacht sales, charters and luxury tourism.

Why it matters: Saudi Arabia has invested heavily in developing luxury destinations along its Red Sea coast.

But attracting wealthy international visitors requires more than hotels and resorts. The Kingdom also needs marinas, yacht services, specialised operators and events capable of drawing the global luxury travel industry.

The Red Sea Yacht Show is intended to help establish that market.

THE BACKDROP: The agreement comes as several major Saudi events have been postponed because of regional security concerns.

Unlike those near-term gatherings, the yacht show is scheduled for 2027 and represents a longer-term investment in the Kingdom's tourism ambitions.

What To Watch: Whether organisers secure the targeted international exhibitors and yacht owners, and whether the event delivers measurable tourism and commercial activity.

Saudi Arabia's dairy industry could be heading toward an unusual arrangement: one company owns the cattle, while another continues selling the milk.

Nadec has signed a preliminary agreement to acquire a dairy herd from Al Othman Agricultural Production and Processing Company (NADA) for around SR370mn. But NADEC isn't buying the NADA business or its brand.

Here's how it would work: NADEC would purchase the cattle, operate them at NADA's existing farm during a transitional period, and then supply raw milk back to NADA under a long-term agreement. NADA would continue operating its consumer business without owning the transferred herd.

Nadec will pay a refundable SR74mn deposit, equivalent to 20% of the proposed purchase price.

Why the arrangement is interesting: NADEC would gain additional dairy production assets, while NADA could continue sourcing milk without carrying ownership of the herd. The structure separates milk production from the consumer-facing business, potentially changing how both companies manage capital and operating costs.

The timing matters: NADEC's Q3 profit fell 73% yoy amid higher feed, freight and insurance costs. The proposed acquisition would add production assets at a time when those costs are putting pressure on margins.

The catch: Nothing is final yet. The agreement is non-binding regarding completion, and the companies still need to complete due diligence, secure approvals and negotiate final contracts. The memorandum runs for up to 12 months.

TEHRAN TALKS: The diplomatic push involving Saudi Arabia, Turkey and Pakistan is now the biggest near-term factor for regional markets. A concrete ceasefire agreement could help reduce pressure on shipping and infrastructure, but the talks have yet to produce one. Reuters has the latest.

ARAMCO EARNINGS WATCH: The oil giant will report its Q3 results on Tuesday, November 3, with an earnings call scheduled for 11 am Riyadh time. Investors will be looking beyond the boost from higher oil prices to see how much crude Aramco actually sold amid shipping disruptions, whether alternative export routes helped offset lost volumes, and how higher transport costs affected profits. Also in focus: the dividend outlook, cash flow and whether the company maintains its $50-55bn capital spending guidance for 2026.

OIL PRICES: Brent crude slipped on Monday as hopes of de-escalation grew, although prices remained elevated after last week's attacks on Saudi energy infrastructure. Reuters reports that Brent was trading near $115 a barrel earlier in the session.

SAUDI EQUITIES: Monday's rally reversed Sunday's losses, but investors will be watching whether the gains hold as the Tehran negotiations develop.

The news doesn't stop here. Neither do we. See you tomorrow.