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Aramco Shares Slump On Soaring Middle East Tensions

Saudi Aramco

Shares in Saudi Aramco slumped on Monday to their lowest price since the Kingdom’s oil giant made its debut on the stock market nearly a month ago, as investors are wary of Aramco’s shares and Gulf assets amid heightened tensions in the Middle East and fears of a U.S.-Iran conflict in the region.

Although oil prices have soared since the U.S. assassinated one of Iran’s most powerful and visible military leader, Qassem Soleimani, concerns about an imminent Iranian retaliation is keeping investors away from assets in the Gulf region, including from shares in Saudi Aramco.

Early on Monday, Aramco’s shares slumped to US$9.08 (34.05 Saudi riyals) on the Tadawul—their lowest level since the world’s biggest and most profitable oil company made its market debut on December 11.

Since a recent high of US$10.32 (38.70 riyals), shares in Aramco have dropped nearly 11 percent, according to Reuters estimates.

Aramco’s shares still trade above the final offer price of US$8.53 (32 riyals) in the initial public offering (IPO), which valued the company at US$1.7 trillion.

A week after Saudi Aramco started trading on the stock market, its shares ended the trading week in Saudi Arabia among the top losers, and wiped out a third of the rally at the start of the blockbuster IPO.

On its second day of trading, Saudi Aramco hit the US$2-trillion valuation that Saudi Crown Prince Mohammed bin Salman has been after for years, but analysts say that size is not everything and governance issues will continue to weigh on the Kingdom’s oil giant.

As Aramco began its life as a public company, some analysts are still wondering how the Kingdom’s oil giant will ease foreign investors’ concerns about transparency and corporate governance risk, considering that Saudi Arabia’s rulers will continue to call the shots.

Analysts have also warned investors that Saudi Aramco may not be a good play amid heightened tensions in the Middle Eastern region and increased risk of attacks from Iran.

By Tsvetana Paraskova for Oilprice.com

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